5 Legal Issues You Always Wanted to Know About Brexit But Were Afraid to Ask

With less than a week to go before the referendum, there are still many uncertainties in the air. But polls apart, both Remainers and Brexiteers should bear in mind the legal effects in case of  Brexit. Although referenda have often been used across the EU (like the 1975 UK Referendum on the membership of the European Communities) some of them like the present one have the potential to cause shattering effects. The consequences of a potential Brexit are several and multifaceted, but perhaps the most crucial legal issues could be summarised in five points (the list is, by no means, exhaustive or definitive).

The right to withdrawal from the EU

The right to withdraw from the EU is already contemplated in the treaties, specifically in Article 50 of the Treaty of the European Union  (TEU). Indeed the drafters of the Treaty of Lisbon as the time they intended to build ‘an ever closer Union’, they regulate the possibility of exit the EU it in these terms:

“(1). Any Member State may decide to withdraw from the European Union in accordance with its own constitutional provisions.

(2). A Member State which decides to withdraw shall notify the European Council of its intentions. In light of the guidelines provided by the European Council, the Union shall negotiate and conclude an agreement with that State setting out the arrangements of withdrawal taking account of the framework of its future relationship with the Union. That agreement shall be negotiated in accordance with Article 218 (3) of the Treaty on the Functioning of the European Union. It shall be concluded on behalf of the Union by the Council of Ministers, acting by a qualified majority, after obtaining the consent of the European Parliament.

(3). The Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement, or failing that, two years after the notification referred to in paragraph 2, unless the European Council, in agreement with the Member State concerned, decides to extend this period.

(4). For the purposes of paragraphs 2 and 3, the member of the European Council or of the Council representing the withdrawing Member State shall not participate in the European Council or the Council discussions or decisions concerning it. A qualified majority shall be defined in accordance with Article 238 (3)(b) of the Treaty on the Functioning of the European Union.

(5). If a State which has withdrawn from the Union asks to re-join, its request shall be subject to the procedure referred to in Article 49.”

Beyond the article’s wording, this is a separate mechanism from the referendum which is a constitutional law tool. Even if the referendum favours Brexit, the right to withdrawal will not be operated automatically, the UK government would activate the clause. Moreover, after requesting and notifying the European Council withdrawal will not operate overnight and will require complex negotiations.

Therefore, the immediate exit from the EU upon a pro-Brexit referendum outcome is not realistic. Withdrawal from the EU is a lengthy and complex process that does not happen automatically, article 50(3) provides that withdrawal would solely become operative (a) once the two year period following notification of the Council has expired or; (b) a withdrawal agreement has been successfully concluded. This agreement has to be ratified by the Parliament of all member states. Taking this into consideration the complexity of the latter it seems reasonable to assume that such negotiations will extend for quite a while; an immediate exit is absolutely untenable in legal terms.

The future status of the UK in Europe

In the European context, as an alternative to the EU membership a European state could become part of another main economic international organisation: the European Free Trade Association - EFTA (integrated so far by Norway, Iceland, Switzerland, Liechtenstein). In contrast to the EU which is a supranational organisation, EFTA is an intergovernmental organisation, focusing on certain areas of cooperation. This would be an alternative organisation that the UK could join if it leaves the EU. The principal goal of the EFTA Convention is to regulate free trade among member states within the European Economic Area (EEA) Agreement between the EU and EFTA. In turn, the EEA provides for the free movement of persons, goods, services and capital within the internal market of the European Union (EU) through its 28 member states, as well as three of the four member states of EFTA (Norway, Iceland, Liechtenstein). So, the UK as an EFTA member state would enjoy guarantees of the EU internal market.The European Council President, Donald Tusk, has anticipated that a new deal will not be quickly negotiated and that the UK will be placed in a ‘legal limbo’ for approximately seven years.

Citizenship and EU ‘migrants’

So far the so-called EU migrants enjoy the rights granted by the EU treaties. Likewise, British citizens living in other EU countries enjoy the full range of rights derived from their EU citizenship. Just to mention the core rights enshrined in the EU citizenship under Article 20 TFEU: EU citizens have the right to move and reside freely within the territory of the Member States (Article 20 II a TFEU); additionally, they enjoy the right to vote and stand as candidates in elections to the European Parliament and in municipal elections in their Member State of residence, under the same conditions as nationals of that state (Article 20 II b TFEU). Last but not least, they enjoy, in the territory of a third country in which the Member State of which they are nationals is not represented, the right to the protection of the diplomatic and consular authorities of any Member State on the same conditions as the nationals of that State (Article 20 II c TFEU). In principle it is correct to say that EU citizens living in the United Kingdom would no longer be able to rely on the aforementioned rights (and vice-versa) if the UK were to leave the EU. In the event of Brexit, the UK as a sovereign state would be entitled to regulate EU migrants, as it does with other nationals. As regards the effect on UK citizens living in other EU countries, they will become third-country nationals.  However, the automatism of the solution is contrary to the principles that inspire EU Law and EU citizenship. Also, one should bear in mind that nationals of third countries (which is what the UK citizens would then be) are also granted certain rights in EU secondary law. Namely, up to a certain extent even non-EU nationals enjoy the same protection against discrimination as EU citizens under the provisions of Directive 2000/43/EC implementing the principle of equal treatment between persons irrespective of racial or ethnic origin.

Freedoms of establishment and movement of goods

Overall, EU membership accords EU companies and citizens a number of additional rights originating from the four fundamental freedoms. The consequences of Brexit would therefore be far-reaching on the internal market and economic freedoms, such as the freedom of establishment. This will affect companies and citizens established in the UK.  EU citizens would no longer benefit from the principle of free movement of workers, and would consequently have to apply for a work permit. As concerns UK companies and citizens engaged in economic activities in other EU countries, as third-country nationals will still enjoy some freedoms. For instance, the free movement of goods does not explicitly apply to nationals of EU Member States only. Under Article 28(2) TFEU, free movement of goods simply ties in with the provenance of the goods. It is all the more applicable in relation to the free movement of capital, since Article 63(1) TFEU even goes as far as prohibiting restrictions on the movement of capital between the EU and third countries. Thus, as third country nationals they could rely on those fundamental freedoms.

Membership of international organisations

Last but not least, as a result of withdrawal, the relationship between the UK Courts and the Court of Justice of the EU will change: the former will no longer be bound to observe the latter’s judgements. In contrast, the membership of the Council of Europe will remain intact. Obviously, one can predict a likely impact on the debate on the European Convention of Human Rights which has already been installed. In addition to that, since the UK has given up some powers in favour the EU in certain aspects of international relations, the devolution or reversion of powers in case of Brexit would affect areas such as the commercial and investment policy which is exclusively handled by the EU at the moment. Even if both the EU and the UK are members of the World Trade Organisation, the EU is concluding trade and investment agreements. A recent report issued by the Organisation for Economic Cooperation and Development (OECD) calculates that in the longer term more restrictive trading arrangements will be concluded than with the EU alongside. Moreover, there would be less competition and lower foreign direct investment and fewer skilled immigrants will. This would hit gross domestic product by an estimate of 5 per cent.

To sum up, the automatism of the legal solution is not embodied in the EU treaties. Treaties’ drafters meant to allow the concerned parties (the UK and the rest of the EU Member States) time to solve the complex issues arising upon withdrawal. To construe such an immediate withdrawal in the light of EU law, therefore, appears to be highly questionable.

Regardless of the outcome, it seems that the status quo has been altered as a recent ruling handed down declaring the compatibility with EU law of UK measures to cap the access by EU migrants to child benefits to protect its finance appears to suggest. Brexit or not, negotiations concerning the status of the UK in the EU will continue throughout the summer and the autumn.

Belen Olmos Giupponi, Liverpool Hope University

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