Dentons, the global law firm, recently released its Global Regulatory Trends to Watch in 2017. In this five-part series, we are publishing excerpts from the report focusing on public affairs and economic sanctions and trade across the world, including the US, Europe, the UK, China, Canada and Mexico. Authors for these excerpts are Andrew Cheung, Joseph Lougheed, Adrian Magnus, James Moore, Kenneth Nunnenkamp, Michael Zolandz, and Richard Jenkinson.
The UK Prime Minister, Theresa May, who was appointed to succeed David Cameron, has made it clear in a speech made on January 17, 2017, that she does not see a future for the UK in the Single Market. Although she has not made it clear, it appears likely that she also wishes to exit the EU Customs Union. However, while on the one hand suggesting a complete extrication from all of the international agreements that hold EU Member States together (along with certain other European countries that are party to some agreements but not others) she has also said that she would like this to be accompanied by a comprehensive free trade agreement with the EU.
The points made in May’s speech were reiterated in a White Paper (a UK Government policy document) published on February 2, 2017. Although the White Paper was hailed as a plan for Brexit, it contains very little new information on the UK Government’s intentions and does not address the mechanics of Brexit in any substantive detail.
Crucial issues remain unresolved by the White Paper. For example there is, as yet, no detailed UK Government proposal for the management of the border between Northern Ireland and the Republic of Ireland (which is and will remain an EU Member State) upon Brexit. This is a highly contentious issue given the troubled history of Anglo-Irish relations and likely problems a hard border will create for the peace process.
May’s plans for the UK are no longer necessarily the UK’s plans. The UK’s Supreme Court ruled on January 24, 2017 in the Miller case that the triggering of Article 50 of the Treaty of European Union (TEU) (a recently-inserted exit mechanism in the EU treaties) could not be triggered by the UK government without primary legislation by Parliament authorizing it to do so. The UK Government has responded by publishing a very short bill which would do just that. After passing the House of Commons, some members of the House of Lords are now in the process of proposing amendments which either try to specify “softer” Brexit terms (e.g. retention of the Single Market) or the ability to approve/reject a deal (with rejection resulting in remaining in the EU). While May has already conceded a vote in Parliament on the final deal with the EU prior to Brexit, it appears that Parliament’s alternative to accepting this deal would not be the UK remaining in the EU but rather exiting without a deal. This would subject the UK to the economic shock of crashing out of every free trade agreement to which it had signed up to at the same time. It is therefore difficult to envisage a deal which would be bad enough to justify a vote for exiting the EU with no deal.
Adding further uncertainty is the ambiguity on the revocability of the UK’s notice to leave the EU under Article 50. A key reason the UK Government lost in Miller was because of its concession for the purposes of the case that Article 50 was irreversible. It did so in order to avoid Miller being decided ultimately by the European Court, which has the final say on the interpretation of TEU. An EU court telling the UK how it could leave the EU would have been extremely contentious politically. A case has been launched with the support of crowdfunding to bring the question of the revocability of notice under Article 50 before the European Court via a reference from the Irish courts.
Yet another ambiguity is whether or not the exit of the UK from the EU also means its exit from the Single Market. The Single Market is also known as the EEA, and is held together by the EEA Agreement. This agreement has its own exit clause. It has been suggested that the exit of an EU Member State from the EU would trigger its automatic exit from the EEA; however, a separate mechanism for exit in the EEA Agreement implies otherwise.
If the UK enters a transitional deal, it is possible its exit from the network of agreements binding it to its fellow EU Member States will stall. The UK has an immense task ahead of it in extricating itself from the EU, one which many have suggested it is simply not capable of achieving. The UK’s civil service has been shrinking for many years and decades of having the European Commission negotiate international trade agreements on its behalf have left the UK short of the expertise it needs to negotiate its own deals. Additionally, the UK’s negotiating partners in the rest of Europe have indicated that they will take a hard line in negotiations. It is therefore unlikely that, by this time next year, a clear road map to the UK’s final destination will be in place.