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The impact of Brexit

View profile for Julia Seary
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  • The trilogy of the European Commission, the European Parliament and the Council of the European Union agree the majority of EU legislation, and the power of the EU means that EU law and ECJ decisions have a direct impact on, and can take precedence over, national law.
  • EU Treaties are the highest level of EU legislation (which sets out the constitutional basis of the EU), followed by EU Regulations (which are directly applicable within the UK) and >EU Directives (which requires the UK to draft legislation to transpose them into UK law).
  • The European Communities Act 1972 provides the legislative basis for transposing EU law into domestic UK law and gives precedence to binding provisions of EU law over inconsistent UK legislation.
  • New law is also made by the judiciary in the form of Judgments handed down by the European Court of Justice. The UK national courts are required to follow decisions by the ECJ which can alter the interpretation of EU legislation.
  • The EU has ‘exclusive competence’ in relation to competition and customs union but has no discretion to require the UK to harmonise law in relation to healthcare, culture, industry, education or tourism.  The UK also has opt-outs in respect of the laws on freedom, security and justice.
  • Areas such as agriculture, consumer protection, transport, social policy and the environment have ‘shared competence’, such that the UK can act if the EU has chosen not to do so.
  • The European Court of Human Rights is not an EU institution but, rather, its jurisdiction depends on countries being signatories to the European Convention on Human Rights, which is incorporated into UK law by the Human Rights Act 1998.

The Impact of Brexit

  • The impact of Brexit on the UK’s legal system is full of hypotheticals but could be wide ranging, whatever form the exit might take.
  • As a Brexitor, one could argue that leaving the EU will reduce bureaucracy and return sovereignty to the UK but Bremainers will argue that Brexit will trigger complex legal ramifications and uncertainty in terms of law.
  • In any event, the UK has a substantial amount of EU-derived law on the statute books and there is uncertainty as to how this would be dealt with and how we would deal with new EU law that the UK might be required to follow in order to continue trading with the EU – such as consumer rights on sales into the EU.
  • The reality is that nobody knows how long it would take to exit the EU and put in place a replacement framework.

The Legal Framework of a Brexit

  • The framework itself is uncertain and there are various models that could be adopted. The degree to which the UK would remain tied into the EU will impact on the extent to which the UK would have to continue to comply with EU law.
  • On exit (which would most likely take a number of years), the UK would no longer be subject to EU Treaties, nor EU Regulations which are not preserved by UK law.  However, many have related national UK legislation and so it would be a complex and time-consuming process of disentanglement to ascertain which pieces of legislation are left standing. 
  • UK law which has been implemented following the introduction of EU Directives would remain valid until repealed or superseded.
  • ECJ rulings that have been reflected in subsequent UK law would also continue to apply.
  • The UK government may decide to take the approach that no law will change retrospectively – which would be the most administratively straightforward solution and mean that there would be no change in law at all.
  • Even if the UK just relied on World Trade Organisation membership, from a practical perspective, the UK is likely to continue to comply with a lot of EU law, whether or not it is legally required to do so.
  • Going forwards, in theory, the UK would not be required to adopt any new EU legislation or be subject to the jurisdiction of the ECJ.  However, the reality is that if the UK wants to continue to trade with the EU, the UK is likely to be required to continue to comply with EU law – for example, in relation to data protection, consumer protection, financial services and product liability – without being party to the law-making process.

The Choice of Governing Law

  • From a contractual perspective, much will depend on the arrangements that are agreed for a future UK/EU relationship post-exit, including what approach the UK government decides to take on conflict of laws rules.  There could be a decision to leave Rome I and II in place, with the English courts being the final arbiter of how these rules are applied.  If Rome I and II were abolished, the Rome Convention would apply.
  • In relation to non-contractual obligations, the Private International Law (Miscellaneous Provisions) Act 1995 would apply in the event that Rome I and II ceased to apply.
  • In any event the EU member states would continue to respect the parties’ choice of governing law on the same basis as before, as they will continue to apply Rome I and II.

What would a Brexit look like?

  • There is no precedent for leaving the EU under the current Treaty provisions and so nobody is quite sure on what terms we would leave.
  • The ‘untested’ exit procedure is set out in Article 50 of the Treaty on the European Union and provides as follows:
    • If the UK votes to leave in the June referendum, the UK will need to notify the Council of its intention to initiate the process (an Exit Notification).  There is no time period, however, within which to serve the Exit Notification.
    • On receipt of the Exit Notification, the EC Council will then negotiate and conclude an agreement with the UK for its withdrawal (the Exit Agreement).
    • If the negotiations are not concluded and the Exit Agreement signed off within a period of two years of the Exit Notification, the EU Treaties will cease to apply (unless that two-year period is extended by agreement).
    • The Exit Agreement must be approved by the European Parliament and agreed by an enhanced majority Council (excluding the UK).
  • It seems unlikely that the two-year period will be sufficient to achieve an Exit Agreement and if the two-year period is exceeded without an agreed extension, then there could be a complex issue of a conflict of laws.
  • It has been argued that, because the UK does not have to serve its Exit Notification within a set period of time, the UK could delay serving the Exit Notification in order to renegotiate our position in the EU followed by a second referendum.  An alternative view is that the Exit Notification would be delayed until the UK has put in place the Exit Agreement (along with various trade agreements).
  • Any trade agreements will need to be approved by every single member state and one word of caution being expressed by Bremainers is that it has taken Canada ten years to conclude trade agreements with the EU.

Potential post-Brexit legal models

A number of structural outcomes are possible, including joining the European Free Trade Association (EFTA) with or without joining the European Economic Area (EEA), entering into a EU/UK free trade agreement (FTA), negotiating a customs union with the EU, or just sit as a member of the world trade organisation (WTO).

The various models currently in existence are as follows:

The Norway Model

  • The UK could join the European Free Trade Association (EFTA) and the European Economic Area (EEA) in order to participate in the Single Market (apart from the Common Agricultural Policy and the Common Fisheries Policy).
  • Continue to participate in the four freedoms – free movement of people, goods, services and capital.
  • Not subject to ECJ jurisdiction.
  • EFTA has jurisdiction
  • Reduced contribution to the EU budget.

The Swiss Model

  • The UK could join the EFTA but not the EEA
  • Negotiate some bilateral agreements in order to gain some access to the Single Market – freedom of goods and people.
  • EFTA has jurisdiction.
  • Lower contribution to the EU budget than Norway model.
  • Questionable longevity – may force requirement to join EU in order to access internal market.

The Turkish Model

  • The UK could negotiate a customs union with the EU, giving tariff-free access to the Single Market for goods (but not services) without quotas.
  • No contribution to the EU budget.
  • Requirement to harmonise its own laws with those of the EU in certain areas such as consumer protection, competition law and IP.
  • Must adopt a common tariff in line with that of the EU for third country goods and must seek EU approval for third country trade agreements.

The Canadian Model

  • The UK could negotiate a Free Trade Agreement (FTA) with the EU, most likely restricted to goods only.
  • Very time-consuming and can be vetoed (Romania currently threatening to veto Canada’s FTA after ten years of negotiation).

The Rest of the World Model

  • The UK could continue membership of the World Trade Organisation, in order to trade in goods.
  • None of the four freedoms available.
  • No contribution to EU budget but liable for trade tariffs and EU standards (ie. product standards).