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Brexit: A Guide to What Might Happen

On Wednesday the 29th of March 2017, history was made whereby a notice was served upon the European Council setting out the United Kingdom’s intention to withdraw from the European Union. This article will set out the basic principles of the procedure going forward and how it could affect you personally and commercially.

What happens next?

Now that the government has notified the European Council of the UK’s intention to withdraw from the European Union, the European Council will provide negotiating guidelines. The withdrawal agreement and trade agreement will then be negotiated between the government and the Council of the European Union based on the recommendations of the European Commission.

Once a consensus has been reached, the European Parliament will then need to agree to the draft withdrawal agreement by a simple majority (50%). Having had the main components agreed by the European Parliament, the Council will continue to conclude the withdrawal agreement on behalf of the EU by a qualified majority (at least 72% of Council members/20 of the 27 member states (excluding the UK) and at least comprising of 65% of the population of those member states).

Can we withdraw our notice to leave the European Union?

Unfortunately, Article 50 of the Treaty of the European Union is silent on the ability to withdraw a member’s notice to leave the EU. In the recent case of Gina Miller, it was agreed between the parties that an Article 50 notice was irrevocable and the Courts did not examine the issue further.

A similar view was taken by the House of Lords Committee on the Constitution as it considered it prudent for Parliament to work on the assumption that the service of the Article 50 notification is an action that the UK cannot unilaterally reverse (meaning that it would need the agreement of the EU to revoke the notice).

What will the effect be?

Whilst the notice serves to show the nation’s intention to leave the EU, it does not expressly state that we will be leaving the European Economic Area (‘EEA’), as no reference is made to this in The European (Notification of Withdrawal) Act 2017. However, the government has confirmed that they will not be looking to continue the UK’s membership to the EEA. This means that the UK will need to negotiate not only its exit from the EEA, but also potentially negotiate a new trade agreement in order to continue trading with other EU members states.

Once a deal has been agreed, then Government will look to affect the Great Repeal Bill. This will, in effect, repeal the European Communities Act 1972, which is the piece of legislation that supranationally binds the UK to the EU. It is expected that this will convert existing EU law (which is already enforceable in the UK) into domestic law “wherever practical and appropriate”.

Whilst it appears that by doing so, the UK would not become entirely sovereign, this would provide some much needed stability for our economy due the continuity of the UK’s existing laws. It appears that Government has also provided itself with some wriggle room, by not only stating “wherever practical and appropriate”, but they will look to enable changes where needed (this will still be subject to parliamentary oversight) via the use of secondary legislation to enable the government to:

  1. Take account of the Brexit negotiations as they proceed; and
  2. Address issues in the preserved EU law following Brexit.

At present, we are awaiting further insight as to the intentions of the government.

Following the enactment of the Great Repeal Bill and the removal of the European Communities Act 1972, the UK courts will no longer have to prioritise EU law over the laws of the UK nor will they be subject to the jurisdiction of the Court of Justice of the European Union.

How will this affect you?

Employment

With regards to employment law, there does not appear to be any major structural changes coming into effect. However, a lot of EU legislation on employment law is heavily directives-based, so there is a possibility that some EU directives will be repealed.

There is a suggestion that the EU Working Time Directive will no longer apply upon Brexit formally occurring. The EU Working Time Directive provides for the right to work up to 48 hours within a working week and the right to a minimum of 20 days’ paid holiday per year.

Whilst it is highly unlikely that the government will look to repeal this Directive (as the current law applying to England and Wales already provides for more advantageous rights), there is the real possibility that these requirements could be reduced for smaller employers, as a method of lowering business costs and increasing economic growth among SMEs.

Whilst the Transfer of Undertakings (Protection of Employment) Regulations 2006 (‘TUPE’) were integrated into law via European directive, TUPE has existed in the United Kingdom since 1981 and is conceptually entrenched in most commercial transactions involving the sale of businesses. The amendments to TUPE made in 2014 have increased the protections above and beyond what was required by the directive. It therefore seems unlikely that there will be any significant reforms to this area anytime soon.

Immigration

Immigration has been a major part of the pro-Brexit agenda, it is likely that the right to free movement of persons would be modified to give the government the right to control the entry and exit of EU nationals. It is also likely that the government would need to agree to the free movement of people in some capacity in return for a trade agreement with the EU. This will be, without doubt, one of the more contentious issues to be discussed before an agreement is reached between the government and the EU and again, it is unlikely that there will be much of a change to the current system an agreement can be reached.

Tax

One type of tax regime that is likely to see significant amendments is Value Added Tax (‘VAT’). VAT is a European tax, for which the UK has had to fall in line with the European directive. Whilst some people believe that VAT will be abolished entirely, there does not appear to be much initiative to do this as it is a major revenue resource for the UK.

It is likely that such amendments will provide greater freedom for the government to decide on its VAT policy. However, it is highly likely that the EU’s VAT policy will have some bearing on the government’s VAT policy with regards to double taxation and tax avoidance.

Conclusion

It is important to note that withdrawal from the EU will be a gradually negotiated process and any changes to current EU law are unlikely to be immediate. Leaving the EU would create a large legislative deficit which could result in an inconsistent-performing economy and it is believed that the current legislative position will remain as it is for the short to medium term.

At Foskett Marr Gadsby & Head LLP, we have the expertise and the experience to guide you through the ever-changing commercial and legal scenery. Should you wish to speak further about this with someone, then please either contact either John Worby (Epping office) or Robin Cearns (Loughton office) on 01992 578642.