Brexit: reviewing the process and its consequences

When, during the last General Election campaign, the British Prime Minister spoke about his intention to put withdrawal from the EU to a referendum were he elected, withdrawal was not actually considered a likely option. Today, Mr. Cameron’s government1, the other Member States as well as the business community feel deeply concerned when facing the issue. Uncertainties about the process of withdrawal from the EU on the one hand (I), and about the type of post-exit relationship that the UK would maintain with the EU on the other hand (II), definitely fuel this growing concern.

I. The process for withdrawing from the EU

Withdrawal from the EU falls under article 50 of the Treaty on the European Union as revised by the Treaty of Lisbon. Decision to withdraw from the Union shall come from the departing Member State and shall be made in accordance with its own constitutional requirements (a). Such a decision shall be notified to the European Council which will initiate the process of negotiating a withdrawal agreement and set a two-year deadline after which the treaties shall cease to apply to the departing State (b). Yet, setting up the negotiation process is made difficult due to the lack of detailed information regarding the content of the withdrawal agreement (c).

a. A political decision made by the Member State

The first paragraph of article 50 reads that “Any Member state may decide to withdraw from the Union in accordance with its own constitutional requirements”.
The UK has decided to put the decision to a referendum which will take place on June, 23rd 2016.

b. Notification of the decision and negotiation period

If the British people were to vote in favour of withdrawal from the EU and supposing the decision were immediately notified to the European Council, the treaties would cease to apply to the UK by the end of the first semester of 2018, unless the UK was granted an extension by the Council.

Once the decision to withdraw is made formal, the departing Member State shall notify the Council. Theoretically, there may be a delay between the formal decision made by the departing Member State and its actual notification to the Council which solely produces legal effects regarding the EU. As far as the UK is concerned, the Prime minister, in several statements2, made it clear that if voters decided in favour of an exit from the EU, the withdrawal process would be immediately entered into.

The date of notification of the decision to the Council is of primary importance as article 50 reads that the treaties shall cease to apply to the departing State:

• either from the date of entry into force of the withdrawal agreement
• or two years at most after the notification to the Council if the withdrawal agreement has failed to be finalized within this period of time.

It seems highly unlikely that a withdrawal agreement addressing every issue regarding EU-UK relations could be finalized in such a short period of time. The British government has actually informed Parliament that the whole process could take up to no less than a decade before a withdrawal agreement is finalized3.

For the treaties to remain applicable after the two-year deadline, the British government would have to apply for an extension to the Council which would have to make a unanimous decision on the matter4. Some observers note5 that, according to the context in which the initial withdrawal negotiations would take place, such a unanimous decision could prove difficult to obtain.

c. Negotiation of the withdrawal agreement

Article 50 (2) reads that “the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union”. It is also specified that “the agreement shall be negotiated in accordance with Article 218 (3) of the treaty on the Functioning of the European Union” under which the Commission is to lead the negotiations.

Once the withdrawal agreement is set up, the Council shall rule by qualified majority6 after securing the approval of the European Parliament.

The process is misleadingly straightforward. Indeed, as the EU Treaty does not actually set out explicitly what issues would need to be addressed in the withdrawal agreement, it might very well reach beyond a mere definition of the exit conditions and decree about future UK-EU relations. Should it be so, the approval of the withdrawal agreement could only occur on a unanimity basis, especially if matters such as tax fell within its scope7.

II. The UK’s status after exit from the EU

Withdrawal from the EU would give the UK a third State status, freeing it from all legal obligations ensuing from EU law. It would also make it impossible for individuals and legal entities to invoke EU law. As a consequence,

• Treaties would cease to apply, which would deny the UK access to the EU’s Single market;
• EU regulations would cease to apply in domestic law;
• Regarding directives, the British Parliament would have to decide if transposing acts should be kept as they are, amended or repealed. In any case, they would no longer be considered as binding and their violation could no longer be invoked in disputes brought to British courts. International treaties signed by the EU would also cease to apply in the UK.

Regarding the status of the UK after exit, several options may be considered8:

• A first option would be for the UK to join the European Economic Area (EEA)9 or the European Free Trade Association (EFTA)10: the UK would have to apply since neither the European treaties nor the EEA or EFTA treaties provides for automatic membership if a Member State opts out of the EU. Joining the EEA would offer access to the Single Market and to the free movement of persons, goods, services and capital without the constraints regarding other aspects of the EU policy. It would nevertheless mean that the UK would have to keep abiding to a significant part of European rules while having far lesser influence on the decision-making process. Regarding the EFTA, some observers note that it now covers only a minute part of the economic relations between its member states (Switzerland particularly) and the EU/EEA11.

1. A second option, called the “Switzerland way” by observers, would be for the UK to aim at concluding bilateral sectorial agreements12. It would consist in concluding as many sectorial bilateral agreements as needed on the basis of classic international law. Note that the term “Switzerland way” may soon prove ill-chosen as the EU and Switzerland have opened negotiations on “a common institutional framework for existing and future bilateral agreements” which would compel Switzerland to introduce European rules into its domestic law and put it under the judicial surveillance of the ECJ13.

• A third option would be for the UK to negotiate a Customs union with the EU, similar to the existing Association Agreement between Turkey and the EU. Yet, in this case, the UK would not be free to adopt its own customs tariffs with third states and would still be denied access to the EU’s Single market.
• A fourth option would be for the UK to negotiate a free trade agreement or an association agreement with the EU which would allow a “made-to-measure” access to the Single Market. In the meantime, the UK would also have to negotiate free trade agreements with third countries and other international bodies. This option would certainly prove an immense and, therefore lengthy, process.

1 See The process for withdrawing from the European Union, presented to Parliament by the Secretary of State for Foreign and Commonwealth Affairs by Command of Her Majesty, February 2016, Cm 9216.

2 Ibid. §2.4

3 Ibid. §2.9 : in case this agreement both settled the exit conditions and defined the future relations between the UK and the EU

4 EU Treaty, art. 50 (3)

5 Is Withdrawal from the European Union a Manageable Option, A review of Economic and Legal Complexities, Phedon Nicolaides, College of Europe – Bruges Economic Policy Briefings n°28/2013.

6 Note that article 50 (4) of the EU Treaty reads that “the member of the Council representing the withdrawing Member State shall not participate in the discussions of the Council or in decisions concerning it.

7 See Cm 9216 and Si le Royaume-Uni quittait l’Union européenne : Aspects juridiques et conséquences des différentes options possibles, Jean-Claude Piris, Fondation Robert Schuman – Question d’Europe n°369, 26 octobre 2015.

8 Si le Royaume-Uni quittait l’Union européenne : Aspects juridiques et conséquences des différentes options possibles, Jean-Claude Piris, Fondation Robert Schuman – Question d’Europe n°369, 26 octobre 2015.

9 EEA includes Iceland, Liechtenstein and Norway which are granted access to the Single market through free movement of persons, goods, services and capital.

10 EFTA includes Iceland, Liechtenstein, Norway and Switzerland. This agreement sets trade relations between the four member States. Relations with members of the EEA and the EU are also covered by the EFTA.

11 Op. cit. note 8

12 See Rapport d’information déposé par la commission des affaires européennes sur les négociations de l’UE avec le Royaume-Uni relatives à son maintien au sein de l’UE, Assemblée Nationales, Rapport n°3496, Février 2016.

13 Ibid.