The U.K. has voted, in a popular referendum, to leave the EU. The referendum is not legally binding and the result was extremely narrow: 51.9 percent in favor of leaving, 48.1 percent in favor of remaining. This partly reflected a protest vote against a range of issues. The vote in favor of Brexit was unexpected and took the markets, and even those campaigning to leave, by surprise.
There are no settled, coherent views or plans for a post-EU Britain from the U.K. government, the EU or even those in favor of Brexit. The devolved Scottish government has threatened to exercise a veto.
The process of leaving the EU will formally commence when the U.K. notifies the European Council of its intent to withdraw. Article 50 of the Treaty of European Union provides for the negotiation of a withdrawal agreement between the EU and the withdrawing state, defining the terms and conditions of the withdrawing state’s relationship with the EU.
Only the British government can trigger the Article 50 notification. They have already said that it will only make that notification once there is a clear view of the arrangements being sought from the EU. Notification of the U.K.’s intent to invoke Article 50 is unlikely to start until after a new Prime Minister is in office, sometime in October of this year.
If no agreement is concluded within two years of that notification, then the U.K.'s membership will end automatically, unless the European Council and the U.K. decide jointly to extend this period (the Interim Period).
The negotiation process is likely to be lengthy and will not be rushed. In the future, the U.K. could be part of the European Economic Area (EEA) or the European Free Trade Association (EFTA), or its relationship with the EU could rely on the framework of World Trade Organization (WTO) rules.
The U.K. is the world’s fifth largest economy and London one of the world’s preeminent financial and legal centers. Business and trade will continue and develop and the world will adapt. We live in interesting times, and dissatisfaction with the EU is not uniquely British. There have been recent calls for similar referendums in a number of EU member states, including the Netherlands, Denmark, Italy and Austria.
In the Interim Period, it will be critical for companies located both within and outside of the EU to monitor developments and prepare for the “new normal” for business relations with the U.K. Very little is likely to change in the short term, but we are here to help navigate through what is undoubtedly going to be a period of uncertainty. For more information about some of the key areas our firm will be monitoring during the Interim Period, and on which we will continue to advise our clients as they prepare for the U.K.’s exit, click here.
The law firm of Faegre Baker Daniels is counsel to CSIA members through the new CSIA legal plan. Complete information about the plan and its terms can be obtained by phone (+1 844-204-0090), e-mail (CSIALegal@faegrebd.com) or through the plan website (www.faegrebd.com/csialegalplan).
