Article 50 timeline, possible referendum on EU withdrawal agreement and legal challenges

Pictured from left are Catherine Barnard, Professor of European Union Law, University of Cambridge; Michael Lawrence, Chief Executive of Asia House; and David Sayer, Senior Partner & Member of the Board, KPMG UK LLP

Pictured from left are Catherine Barnard, Professor of European Union Law, University of Cambridge; Michael Lawrence, Chief Executive of Asia House; and David Sayer, Senior Partner & Member of the Board, KPMG UK LLP

Article 50 timeline, possible referendum on EU withdrawal agreement and legal challenges

28/07/16

By Naomi Canton

Questions over whether British Prime Minister Theresa May has the mandate to trigger Article 50, legal challenges to Brexit in the High Court and the length of time the UK will need to negotiate a new trade agreement with the EU were among the topics discussed at a seminar held at Asia House focused on the implications of Brexit for business.

Catherine Barnard, Professor of European Union Law, University of Cambridge, opened the seminar titled Implications for Business on Thursday.

Hurdles the UK may face in drawing up a new trade agreement with the EU, whether withdrawal can be stopped during the two-year exit period and the possibility of a second referendum and of the UK rejoining the EU after exiting, were also among the topics discussed.

“There was an expectation that Article 50 would never be used which is why it’s been drafted in such a skeletal manner,” Barnard said. Introducing herself, she joked: “I really think this job title is a death wish so now I describe myself as ex Professor of European Union Law.”

Point 1 of Article 50 of the Treaty on European Union states that a member state that decides to withdraw shall “notify” the European Council of its intention to leave the EU. The service of that notices triggers Article 50, the mechanism by which a country can withdraw.

Barnard told the room packed with influential business figures and diplomats that no one knows precisely what “notify” means.  She said there were two perspectives on what “notify” might mean.

One is that UK Prime Minister Theresa May could notify the European Council, using her prerogative powers.

Another perspective is that there needs to be an Act of Parliament that mandates the UK to engage in the notification process because triggering Article 50 means the UK withdrawing from the EU, making the European Communities Act 1972 (ECA), which provides the supremacy of EU law, redundant.

There are currently seven legal challenges in the High Court over whether Theresa May actually has the mandate from the EU referendum to trigger Article 50 or whether there needs to be an Act of Parliament. One of the challenges has been brought by British hairdresser Deir Santos.

The lead case for the legal challenge is being brought by law firm Mishcon de Reya on behalf of investment manager and philanthropist Gina Miller from London. The other people bringing challenges have not been named owing to abuse that the law firm and Santos had received following the publicity that had accompanied their legal notice.  All the claims will be heard in mid October. “There are concerns over whether Deir Santos has the money to bring the case but Gina Miller does have the money,” Barnard pointed out.

“Permission has already been granted to leapfrog the case to the Supreme Court. It will all be decided by Christmas,” she said.

Barnard explained that British Government lawyers are arguing that invoking Article 50 does not require an Act in Parliament but they have agreed not to trigger Article 50 until after the High Court case has been heard and if their position changes they will inform the court.

“It is expected Article 50 will be triggered in January 2017,” Barnard said.

Article 50 provides for a two-year period for the withdrawal to take place. That is why the notification is so important, she said.

“Two years is a very short length of time for the vast range of issues that need to be discussed. In the case of Greenland, which has a population about the size of Croydon, it took three years to negotiate its withdrawal from the EEC [the EU’s predecessor] and they had only one issue – fish!” she added.

She pointed out the UK had a huge number of issues to negotiate ranging from the position of EU nationals in the UK and UK nationals in other EU member states, to the position of UK staff working for EU institutions, the position of EU agencies in London, EU research grants given to the UK for five-year periods in 2015, agricultural support and regional funds. There is also a vast body of EU legislation which will be swept aside once the UK withdraws, she said.

“In that two-year period before any negotiations of any sort can start, the European Council has got to give guidelines to the European Commission [which acts as EU negotiator] on how to conduct its negotiations which eats into the two year period,” she pointed out.

The Treaty on the European Union ceases to apply at the end of the two-year period. If there is no successful negotiation, there will be a disorderly exit which is unacceptable so an orderly exit is needed, she said.

The two-year period can be extended only if agreed by all EU member states. It only takes one state to not cooperate, she said.

There will be French presidential and legislative elections and German federal elections in 2017. “At election times governments tend to become more inward-looking. So once the notification is triggered the balance of power shifts in favour of the EU and that’s why we have not rushed into it,” she said explaining why the UK was being tactical about when the clock started ticking.

So can the UK’s withdrawal from the EU be stopped? “Views on this are divided,” Barnard explained. “One perspective is that we can stop it as long as we are members of the EU and EU law applies right up to the moment of withdrawal. That was the view taken by the House of Lords Select Committee prior to 23 June.  It’s a bit like divorce, you can always pull out before you get the decree absolute,” she said.

But she pointed out the EU Commission, conversely, had already said it was “a one-way ticket once triggered and that was it and there was no provision to stop withdrawal.”

“I am inclined to believe that the political reality is such that, if the UK does change its mind, it could stop the process and the EU would be relieved because of the ramifications of us leaving,” she said.

She said another unanswered question was what role should Westminster, Scottish Parliament and the Welsh Assembly and Northern Ireland Assembly play? How often should they be consulted about the withdrawal process? What about the Select Committees of Parliament?” What about the role of businesses like yourselves,” she said referring to those present at the seminar, “who may have many interesting points to make? There are important issues of process to work through and this will take time,” she said.

She added whilst the withdrawal agreement only needed to be adopted by 20 EU member states acting as a qualified majority, the UK’s future relationship with the EU, be that a Switzerland, Norway or Turkey-style agreement or other type of agreement, would need to be agreed by every EU member state as a unanimous vote and by the European Parliament.

The UK is likely to form a “mixed agreement” similar to the EU-Canada FTA  known as the Comprehensive Economic and Trade Agreement (CETA)  (yet to be ratified)  and the EU-USA deal (currently being negotiated).  In respect of CETA, she said that 38 national parliamentary chambers had to vote on that, including eight regional parliaments in Belgium, one of which, Wallonia, has already said it would not vote in favour of it.

“The Canada-EU deal has taken give to nine years to negotiate and it’s still not ratified,” she pointed out.

She said the UK may try to get the framework of its future relations with the EU wrapped up with the withdrawal agreement and then it only required qualified majority voting. “Some EU members states are ok with this but France is not, so a future deal with the EU may be more problematic than first appeared. It very much depends on the good will of the other side.”

But then she pointed out the President of France François Hollande may not be in his role in 18 months time owing to the 2017 elections. He is, however, eligible to run for a second term in office.

A shortage of trained people able to negotiate UK trade deals with other countries in the UK’s civil service was another problem. The UK civil service was now 27 per cent smaller than it was in 2005, she said, adding it was at its smallest size since the Second World War. However, a Brexit Unit is now being set up, she pointed out, that draws staff from different departments such as the Cabinet Office, Treasury and Foreign Office.

She said any future trade deals the UK negotiated with other countries would be “on the terms of the country we are speaking to.”

Barnard said she could not “see” a second referendum happening in the near future but that there might be the possibility of a referendum on Article 50 withdrawal agreement once concluded, especially if it was wrapped up with the future relationship of the EU.

“I can see a possible referendum on this,” she said. “The Leave campaign did not really have a manifesto going forward and people voted Leave with lots of different agendas so there is an argument there could be a second referendum on the result of the Article 50 negotiations. But what would the phrasing of that question be? “ she asked. “And how many options would people be given?”

Nevertheless the UK could rejoin the EU if it so wished after exiting, Barnard said. But she said the UK would have to rejoin like any other candidate country and all the opt-outs that Britain had successfully negotiated (eg to not be in the eurozone or in Schengen) “the UK would not have going forward,” she said.

Businesses and Governments represented at the seminar included Debenhams, Mitsui, HSBC, KPMG, Nikkei, the Singapore High Commission, the Australian High Commission, the New Zealand High Commission, Bank of Japan, Mizuho International, Nokia, and RELX Group.

Implications for Busines is one of several events in the Asia House Brexit Series which Asia House is organising to bring clarity to the complex issues raised by Brexit.

naomi.canton@asiahouse.co.uk

To find out more about the Asia House Brexit Series that Asia House is holding click here.

To read other stories on Brexit that Asia House has covered click here. 

A roundtable discussion, in partnership with KPMG, will take place at Asia House on 1 August with Dr. Dang Viet Dung, Deputy Mayor of Danang City; Lam Quang Minh, Director of Danang Foreign Affairs Department; and Nguyen Xuan Binh, Vice Director of Danang Tourism Department, on Vietnam’s economic development and Danang’s central role in it. For more information click here.