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Brexit – What happens next?

27/06/2016 | Lucy Hamilton-James

Following the outcome of the EU Referendum, this article deals briefly with the formal process of the UK to withdraw from the EU.  The decision of the electorate for the UK to leave the EU is the start of what could be a long divorce process.  Until that process is complete, the UK will remain part of the EU.

The formal process for an EU member state to withdraw from the EU is contained in a so far unused exit clause – Article 50 – within the Lisbon Treaty.  Article 50 contains 5 short paragraphs which provide guidance as to the steps which must be taken by the withdrawing state and the remaining states to facilitate a withdrawal.

In brief; the first formal step is for the UK to formally notify the EU Council of its intention to withdraw from the EU.  This has been referred to in the press as the “Article 50 Notice”.  The service of the Article 50 Notice will be followed (and quite possibly preceded) by a negotiation period during which the remaining EU states and the UK take steps to reach an agreed form of Withdrawal Agreement.   During this negotiation period, EU laws still apply to the UK which would also continue to participate generally in EU business.  The UK would not however participate in internal negotiations within the remaining EU states regarding their discussions and decisions on the Withdrawal Agreement.  The negotiations themselves will take place between the EU Council and the UK but it is the EU which has the final say on its terms.

The disapplication of the EU Treaties, and thus the actual departure of the UK from the EU, occurs at the earlier of the date of entry into force of the Withdrawal Agreement or 2 years after Article 50 is invoked by the UK having notified the EU Council of its intention to withdraw.  However, Article 50 provides for the extension of that 2 year period should there be unanimous agreement between the EU Council and the withdrawing state for it to be so extended.

Considering the pretty significant function for which the provisions in Article 50 were designed to manage, it is striking how vague it is.  This is likely to be because its actual use was never considered a possibility.  That said, in view of the involvement of 28 countries, including the withdrawing state, and the EU institutions themselves, in the negotiations, the lack of detail could be a distinct advantage in that it will also allow for a degree of flexibility and will likely make the negotiation process easier to manage.  In addition, and from the EU’s internal side of the negotiations the Withdrawal Agreement need only have a qualified majority of the remaining states’ agreement for it to be concluded.

So, where does that leave the UK?  Despite calls by EU representatives over the weekend, only the UK can invoke Article 50 and the timing of that is solely in its gift.  The Prime Minister has indicated that the formal process will not commence until his successor is appointed (the 1922 Committee has today announced that the new leader of the Conservative Party will be chosen by 2 September 2016).  In a speech on 27 June 2016, The Chancellor, George Osborne, sought to provide reassurance by confirming that “In the meantime, and during the negotiations that will follow, there will be no change to people’s rights to travel and work, and to the way our goods and services are traded, or to the way our economy and financial system is regulated.”

While the result of the EU referendum continues to sink in, the posturing and strongly worded rhetoric from the EU has begun but is unlikely to last.  The UK and the EU are perfectly capable of working together and indeed need each other so the threats of punishment on the UK and calls for immediate disengagement being made by certain EU state ministers can be seen for what they are.  It is notable that the Heads of State, including those from outside the EU are quite rightly remaining calm and measured in their responses to the referendum result, however shocking,  which can only help to reassure the public and the markets and ensure that stability is returned sooner rather than later.  Whatever side of the fence they are on, the powers that be are well aware of the unilateral damage that prolonging uncertainty can cause and no one wants that.

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