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The EU Referendum – Not as Simple as It Seems?

13/04/2016 | Nick Leigh

The legal repercussions of the UK voting to leave the European Union

In societies governed by the rule of law, democracy is deferred – you vote for others and they make the big decisions. Rarely is the general public given the chance to decide directly, even less so on a matter of global importance, such as the Brexit referendum, scheduled to take place on 23 June 2016. But this is not a decision about whether or not you want your grandchildren to grow up in the land of the free or the Brussels gulag. Nor is it about immigrants, benefits, straightened bananas, Boris or Nigel, despite what you will hear. This is a decision about a legal system, and whether or not the framework provided by membership of that system is beneficial to our country.

Project Peace

The European Union began – and begins – with a series of treaties between countries who agreed to conduct their relationships with one another – and, together, with those outside of the EU – for their collective benefit. Following the Second World War, this desire possessed an existential value: it was countries as well as millions of people that had come close to death. Once that danger had passed, the focus of the EU evolved into increasing the living standards of its member states’ citizens. This would be achieved by reducing the restrictions – that is, the laws – preventing people from crossing borders and doing business with others in new markets. That same freedom of movement also created the circumstances for a revolution in leisure travel.

The European Union continues with a series of institutions designed to advance this collective benefit: primarily, the European Council – composed of ministers from every member state’s national government; the European Parliament – which returns members directly elected by all of the EU’s citizens; and the European Commission – in which every nation has a commissioner. Therefore, every EU member has a say in the making of new laws and in how the EU is governed. Some, such as the U.K., have a much stronger voice than others (for instance in respect of voting rights in the European Council).

Peace has reigned for so long in Europe that many no longer question why it has lasted. A legal framework that allows the free movement of people and the free market to flourish across borders has been one of the most significant reasons. Leave that, and you leave one of the most successful environments for the development of both business and the lives of individuals in the world.

The Money

Take, for example, the UK’s financial sector, universally recognised as world class. Brexit will deny financial organisations the automatic authorisation to operate in other EU countries that arises from their authorisation to operate in the UK, and may damage their business significantly. While the rehabilitation of the reputation of bankers still has some way to go, and such authorisation may be a long way down the list of many people’s considerations, the financial industry remains one of the UK’s most successful, is a major employer and contributed more than £125 billion in gross value added to the UK economy in 2015. In 2013-14, the banking sector by itself contributed £21.4 billion in tax. Damage this, and you damage the nation. Those in favour of Brexit are almost certain to say, but yes – we pay £50m a day to Brussels! But is that figure really £15m? Or £11m?  And when the exchequer receives more than £500 billion each year in tax revenue, and much of the money paid over to Brussels returns as grants and investment, is this really the expense people think, considering the access to the single market?

Trade thrives in certainty, and is damaged – perhaps dangerously so – by uncertainty. Legal systems strive to introduce certainty in otherwise uncertain environments. The EU is no different. It certainly has problems that require serious reform, but look beyond its borders – to Russia, to China, to South America, to the Middle East – and there are vast swathes of greater uncertainty than that currently affecting the EU.  It is not such a friendly world out there for a country to go it alone.

The Big “S”

It will make no difference if we leave, say those in favour of Brexit. We are a great nation, and we will continue to be great, even if we are no longer in the EU. More than that, we will be sovereign again.

It is true that the European Communities Act 1972 established the principle that the UK’s laws were subordinate to those of the EU. One may then wonder why we still elect our own governments, still decide what we do with our taxes, and still have our own foreign and defence policies. In fact, the EU only has power over those areas in which member nations permit it to act, thanks to the principle of conferral. As the UK has opted out of many such areas, we have retained much of our sovereignty. Meanwhile, use by the EU of the sovereignty we have pooled remains limited by the EU’s own rules. Though deemed irrelevant by many, the deal secured by David Cameron earlier this year asserts the importance of subsidiarity, i.e. that the EU only acts when the proposed action cannot be better achieved by the member state itself, and as close to the citizen as possible. This is why some of the EU legislation most beneficial to the citizens of the UK is found in the areas of employment, science, agriculture and the environment – areas which many citizens believe the UK government has ignored over the years.

It is a peculiarity of the Brexit debate that those passionate to leave the EU in order to restore our sovereignty are almost certain to applaud our membership of NATO, which commits the UK to such action as is necessary – including military action – in the event that another NATO member is attacked, even if that dispute has nothing to do with us.  The same could be said for membership of the World Trade Organisation, which requires a degree of surrender of sovereignty in return for improvements in the conditions in which our companies do business globally, and which enhances their success, profitability – and tax payments.

Come 24 June 2016

Should the British public vote to leave the EU, the country will commence a period in which the terms of our departure are negotiated. Article 50 of the Lisbon Treaty allows two years for this process to take place. If no agreement is reached within that time, the UK and the European Council can agree to extend it. Until those negotiations come to an end – a negotiation in which the world’s fifth largest economy departs from a body that accounts for almost 25% of global GDP on not wholly friendly terms – the UK remains a part of the EU, and subject to its rules. No one knows if that negotiation will last six months, or ten years, or if the European Council will decide not to extend the period for negotiating, at which point the UK will find itself outside of the EU with, perhaps, no trade agreement(s) to replace it. This would not just affect the UK’s dealings with the EU, it would also hamper our relationship with other nations of the world, for as a member state the UK benefits from the global agreements the EU reaches with a vast amount of countries beyond its borders. Indeed, we ourselves help negotiate them, a power that would be lost with Brexit.

But, about those bananas …

Over the next three months, we will be told: be like Norway (out of the EU but with access to the single market); be like Switzerland (a bilateral trade agreement with the EU as part of the European Free Trade Association); be like Algeria (left the EEC in 1962 on gaining independence from France); be like Greenland (left the EEC in 1985 although stayed a part of Denmark); be like Saint Bartélemy (seceded in 2012 from Guadeloupe, a part of France, and thus the EU). But the fact is, we will be like none of these countries, for our circumstances – and indeed our nation – are entirely different from any of them. Meanwhile, as Norway is a member of the Schengen area, it has a higher rate of migration than the UK. And, for now at least, Switzerland can access the EU’s single market only because it has been forced to accept unlimited EU migration. So perhaps being like Switzerland would mean that immigration from the EU increases, rather than decreases. Another law we are all subject to: the law of unintended consequences.

Come 23 June 2016, few voters are likely to be considering legal systems when deciding whether or not to stay in the EU. Of those that do, most will no doubt be thinking about those straightened bananas. As I have referred above, even those most supportive of continued membership believe that the EU has major reforms to carry out. But that is not to say the entire system should be ditched for ever more. Legal systems are fluid and responsive – one only has to look at the legal system of England and Wales to see how it has changed over the centuries – the infamous Waltham Black Act of 1723 introduced more than 50 new offences carrying the death sentence, including being found in a forest while disguised. Many feel that the EU is undemocratic, but there is no doubt that those at its heart recognise this mood. The danger of Brexit is the failure to recognise that the EU is a legal system, and if enough people want it to change, as increasingly is the case, change it will.

Opinions are my own and not the views of my employer

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