Brexit: Part OneRelated Practice Area: Compliance
The 23rd day of June of 2016 marked a historic moment for the European Union – after fifty years of continued expansion and consolidation, one of its largest and most influential member states, the United Kingdom, went to the polls on whether the people wanted to continue its relationship with the EU. By the time dawn broke the next morning, the ‘Brexit’ camp had garnered an unassailable lead of over one million votes and the pound sterling had slipped to thirty-year lows against the dollar. By lunch-time, sitting Premier David Cameron announced his resignation after his failure to convince the nation to stay the course, and voices within the Labour Party called for the same from Jeremy Corbyn. A very eventful day by any stretch of the imagination.
Reflecting on everything that has come and gone in the past month, Theresa May, the United Kingdom’s new premier and first female prime minister since Lady Thatcher, has got her work cut out. The Scottish First Minister has made clear the country’s intention to replay their referendum on the union with England, Wales, and Northern Ireland, whilst there has been talking of the reunification of Ireland. The Bank of England has announced that it stands ready to do all that is necessary to calm markets (although it has held fast in calls to cut interest rates in July), and the UK has been stripped of its top credit rating by one credit rating agency. The UK’s EU Commissioner, Lord Jonathan Hill (responsible for financial services and the capital markets union) has resigned his position, leaving London without an obvious ally and representation in Brussels’ crucial rule-making body, particularly at a time when financial market regulation has been slowly coming together.
Clearly, there is no small measure of uncertainty and a large number of unknowns. Whilst ‘territories’ have previously withdrawn from the EU (a la Greenland, French Algeria), a sovereign state that joined and subsequently left the EU had not been conceived to be within the realms of possibility, much less so in such a public and ambiguous way. One should note that the possibility of a member state withdrawing from the EU had not even been contemplated in the EU rulebook until the introduction of the now infamous ‘Article 50’ procedure in the Lisbon Treaty.
Naturally, where there have been close to fifty years of integration of institutions, laws, and cultures, there are likely to be more than a few flared tempers, broken hearts and loose ends to tie up. The UK does not have a roadmap or even an expectation as to where it would like to be at the end of the prescribed two-year negotiation period from formal notification under Article 50, and even so, any deal brokered would have to be approved by all 27 other member states – a difficult enough challenge in normal circumstances. It is unclear whether the UK would remain a part of the European Economic Area or go at it completely alone.
What is clear though is that, whilst emotions run high now, the UK is a substantial trading partner for the EU, a not inconsiderable military power, and all things aside, a neighbor with land borders to the EU (Ireland). With this in mind, in the same way, that the UK would like to maintain access to the EU’s single market for goods and services, member states will be equally keen to see that they are still able to ply their wares in the UK. And whilst a key campaign item for ‘Brexiteers’ was to halt the influx of migrants coming from the EU, there are equally hundreds of thousands of Brits living across the EU who have built lives and contribute to the local economy (or depend on that local government for their livelihoods). It is clear that a delicate balance must be reached, whatever the outcome.
There are a few models being toyed with at the moment of what the UK’s relationship with the EU could look like, but each clearly falling short of both sides’ expectations of their new relationship. Whatever the eventual outcome, both sides of the campaign agreed that a Brexit would have a damaging effect on the economy in the short term – the long term is anyone’s guess.