Legal issues related to Brexit

June 21, 2016 - by Martha O'Brien, University of Victoria

The question of whether the UK should remain a member of the EU is primarily a political one, and the consequences of the vote are above all political and economic. The law is clear: The Treaty on European Union Article 50 provides a framework process for a member state to withdraw from the EU. If the vote is for Brexit, the UK government can give notice of its intention to the European Council (the other 27 heads of state and government of the EU). After receiving recommendations from the Commission, the European Council then provides guidelines for negotiation of an agreement among the EU itself, the 27 remaining member states and the UK. The Commission negotiates on behalf of the EU and its remaining member states, taking into account the framework for a future relationship between the UK and the EU. Once a draft agreement is reached, it must be approved by a qualified majority (15 member states having at least 65% of the population of the EU, not counting the UK) of the Council of the European Union and a simple majority of the European Parliament.  The EU treaties cease to apply to the UK on the earlier of the date the withdrawal agreement enters into force, or two years after the notice of intention to withdraw is given, unless the European Council unanimously decides to extend this period.

All well and good, but this broad outline gives no hint of the details of the terms of withdrawal that may be agreed. The UK may seek to withdraw by a process other than that provided in TEU Article 50. A transition period may well extend for much longer than two years, during which some or all of the EU’s regulations will continue in force in the UK. Uncertainty will prevail, causing individuals and businesses on both sides of the Channel to delay decisions of all kinds – investment, education, training, travel, among others. Forty-three years of legal integration cannot be undone quickly and cleanly. It is unlikely that UK voters will accept a relationship such as that between Norway and the EU, under which Norway must accept virtually all EU rules on free movement of goods, services, persons and capital, and has to contribute to the EU budget, but has no representatives on the Commission, or in the European Parliament or Council.

For Canadians, Brexit will have legal consequences. The Comprehensive Economic and Trade Agreement between Canada and the EU, due to come into force in 2017, will not apply between Canada and the UK if the UK brexits. It will be difficult to negotiate a trade and investment agreement with the UK until after it has completed its withdrawal from the EU, again due to the uncertainty as to which EU standards and regulations for goods, services and investment will remain valid in the UK, and which will change. Canadian investors have invested approximately $180 billion in the EU, more than a third of which represents business assets in the UK. However, if having a UK subsidiary no longer provides a Canadian investor with access to the rest of the CAD 20 trillion EU economy (as it currently does), Canadian corporations may shift their UK investments to other EU member states, with tax, immigration, employment, training, and other regulatory compliance costs of all kinds.

Many things will not change. Canada and the UK will still both be members of NATO, the UN, the WTO and the OECD, as well as the Commonwealth and many other international organizations. But a rupture between Canada’s allies and trading partners on the continent and the UK will raise many difficult legal, as well as political and economic problems to be worked out.

Martha O'Brian is a Professor at the University of Victoria. She is an expert on EU law. She is also part of the pan-Canada network of experts working on European policy issues, European Studies Network in Canada (