FAQs

 

Here we answer some of the common questions our clients have been asking in relation to Brexit. If you can't find the answer you're looking for here you can email us at brexit@hoganlovells.com

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What did the Supreme Court decide in the Article 50 case?

On 24 January 2017, the Supreme Court ruled, by a majority of 8 to 3, that an Act of Parliament was required to authorise the triggering of Article 50.

In response, the Government published the European Union (Notification of Withdrawal) Bill 2017 shortly afterwards and has sought an expedited timetable for its passage through Parliament. In doing so, the Government aimed to stick to its self-imposed March 2017 deadline for triggering Article 50.

From a practical perspective, it will be at least as important for the Government that the Court confirmed that it has no legal obligation to consult any of the devolved legislatures in Scotland, Northern Ireland or Wales – something which could have caused material delay. However, the Court did emphasise that the Sewel Convention (which requires that Westminster should not normally legislate with regard to devolved matters in Scotland without the consent of the Scottish Parliament) acts as a political constraint that plays an important role in the operation of the constitution.

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Are there other attempted legal challenges of the Brexit process? If so, on what grounds have they been brought?

Case before the Irish High Court

The Supreme Court did not address the question of whether the Article 50 notice could be revoked once it has been given and the Brexit process has been triggered.  This is a question that could only ultimately be determined by the Court of Justice of the European Union (CJEU). Jolyon Maugham, a British barrister, filed a claim in the Irish High Court on 27 January 2017 seeking a reference to the CJEU. That claim rests on arguments that Ireland and other EU member states are in breach of the EU Treaties by excluding the UK from EU summit meetings. Mr Maugham has said he is targeting a hearing date in early April on the question of whether the Irish Court should make a reference and would hope for a decision by the CJEU within three months of the question being referred.

Case on EEA membership

Two members of the think-tank British Influence filed a claim on 29 December 2016 in the English High Court challenging the Government’s view that the UK will automatically leave the European Economic Area (EEA) following its departure from the EU under the Article 50 process.  The Claimants sought a declaration that the UK can only leave the Single Market by following a separate formal withdrawal procedure set out in Article 127 of the EEA Agreement and that this procedure would also require prior Parliamentary approval. The claim had been joined with a parallel claim brought by four individuals who live in the UK or in other EEA States. On 3 February 2017, the High Court refused the Claimants permission to bring the challenge on the basis that it was "premature" as a final decision had not yet been made by the Government on how the EEA agreement would cease to apply to the UK. 

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What is the likelihood of Scotland seeking independence?

A substantial majority of Scottish voters voted to remain in the EU. This gives rise to the prospect that Scotland will push for independence in the hope that this will allow Scotland to remain in or rejoin the EU as an independent member. The Scottish First Minister, Nicola Sturgeon has indeed threatened to call an independence referendum if she does not obtain concessions from the UK Government in relation to Brexit (such as the UK remaining a member of the Single Market).

However, it is not clear whether Scotland would be able to join the EU even if it gained independence – any attempt to do so would require unanimous approval of all member states and may be vetoed by a country with secessionist concerns.

In response to the Supreme Court Article 50 judgment, the Scottish First Minister said that "there remains a clear political obligation" on the UK Government to consult Scotland throughout the Brexit process. However, the UK Prime Minister has said that the devolved administrations will not have a veto on the deal done with the EU. Scotland's status is one of the many moving parts in the complex political and legal Brexit process. No-one can safely predict what Scotland will seek to do.

Currently, the Scottish Government has little regulatory role over offshore upstream oil and gas exploration and production (this is reserved to Westminster). If Scotland were to become an independent state, the position will change and there will need to be a resolution of a range of issues. In the area of offshore upstream oil and gas, these issues include:

(a) Delineation of the offshore areas reserved to England and Scotland.
(b) Tax treatment (in particular, the tax treatment for decommissioning liabilities). Tax treatment of decommissioning liabilities is of increased importance as we enter into a period when fields approach the end of production.
(c) We will be keeping the entire issue under review as developments arise.

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What are the UK Government's negotiating priorities?

Theresa May has made clear that she wants the post-Brexit relationship between the UK and EU to be governed by a bespoke trade deal rather than the terms of any existing model. The UK Government is committed to:

(a)          UK control over immigration from the EU;

(b)          an end to big budget contributions to the EU;

(c)          an end to the CJEU having "direct legal authority" in the UK; and

(d)          the ability to do trade deals with the rest of the World.

The logical consequence of these commitments is that, in political terms at least, the UK cannot remain a member of the Single Market or the Customs Union (see below).  

However, the Government has stated its desire to secure the maximum possible access to the Single Market through on-going trade without tariff or regulatory barriers in key sectors. In this regard, Mrs May mooted a potential customs agreement or "associate membership" of the Customs Union.

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What might a 'bespoke deal' between the UK and EU look like?

The Brexit White Paper has suggested that barrier-free trade could continue on a reciprocal basis with continuity of regulatory standards and the UK Government's intention to incorporate all existing EU laws and rules into domestic law (through the Great Repeal Bill) might point to a long-term future of close regulatory cooperation and alignment.

However, this approach faces at least two challenges:

(a) First, even continuity will require choices to be made and agreements with the EU to be struck – because important aspects of the existing regulatory regime require and assume the involvement of EU institutions and other member states.

(b) Secondly, a bespoke trade agreement based on the maintenance of sufficient regulatory alignment will need new dispute resolution mechanisms that do not offend the demands on both sides for control. This may point to an on-going role for the CJEU in specific areas in policing the agreement or to a specialist arbitral tribunal or committee established jointly by the UK and EU. In the Brexit White Paper and in response to Parliamentary questions, the Government has expressed its preference for the latter.

The UK Government has also stated its intention to strike a deal with the EU during the two year negotiation period following the Article 50 notification. On Brexit taking effect, the UK Government's preferred means for avoiding a regulatory cliff-edge is a phased implementation of the terms of that agreement. The Government has suggested that the implementation period will differ depending on the subject. In other words, it will not be an extension of the status quo but an action plan for delivering change.

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What is the Customs Union?

A customs union is a trade bloc between two or more countries. Its members agree not to impose tariffs on each other's goods and to impose common external tariffs on goods from countries that are not part of the customs union.

Each EU member state is part of the EU Customs Union and they therefore all negotiate trade deals as one. A member of the EU Customs Union cannot negotiate an independent bilateral trade agreement with a country outside the EU. This would be in breach of the EU's Common Commercial Policy under which the EU negotiates on behalf of the member states.

It may be possible for the UK to enter into a bespoke customs union with the EU.

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How would a free trade agreement be ratified?

A future trade agreement between the UK and the EU would be entered into pursuant to Article 218 of the TFEU. The agreement would need to be:

(a) approved by the European Parliament acting by a simple majority (Article 218(6)(a) TFEU); and

(b) approved by the Council of the European Union - the Council generally acts by qualified majority voting (Article 218(8) TFEU) with the exception of association and accession agreements, agreements risking prejudice to the Union’s cultural and linguistic diversity, and agreements covering areas where unanimity would be required for the adoption of internal EU measures (it seems likely that a future UK-EU agreement will include provisions requiring the Council to act unanimously).

A 'mixed agreement' (i.e. one that deals with areas of exclusive EU competency, and exclusive Member States competency, or areas of joint competency) will also have to be ratified by the Member States according to their domestic constitutional requirements. The contents of the White Paper suggest that a future EU/UK agreement will be a mixed agreement as the Canada/EU FTA was treated as a mixed agreement and the Government has made clear that it hopes to negotiate a more comprehensive agreement than the one agreed by Canada and the EU. The CJEU has recently been asked to determine whether or not the Singapore/EU FTA is a mixed agreement and in that case, the Advocate General gave her opinion that the agreement was a mixed agreement because it contained certain provisions on, amongst other things, trade in air transport services, maritime transport services, and certain types of non-FDI investment. The CJEU is expected to give its decision later this year.

An agreement to extend the two-year negotiation period would require the unanimous agreement of the European Council (Article 50(3) TEU).

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What will happen to EU law in the UK when Brexit takes effect?

The Government has stated its intention to introduce a Great Repeal Act that will “convert existing EU law into domestic law, while allowing Parliament to amend, repeal or improve any law after appropriate scrutiny and debate”. This means that, immediately on Brexit, the Great Repeal Act will:

(a) repeal the 1972 European Communities Act resulting in EU law ceasing to apply in the UK directly; and

(b) simultaneously transpose much of EU law into UK law.

The Government will then, over time, have to make policy decisions about which EU-derived laws to repeal and which to retain. It is expected, for example, that rules on free movement of workers would be among the first to be repealed.

Wholesale transposition will not be possible in some areas, meaning that choices will have to be made pre-Brexit. For example, where a particular EU law relies on continued membership of the EU or provides for regulation at EU-level, the legislation will need to be changed as it is transposed into UK law in order to operate effectively. It will be necessary to work out pre-Brexit how to adapt such laws so they will work practically, for example by establishing new UK regulatory bodies to replicate the work previously done at EU level. In addition, the Government's intention to transpose all EU law into domestic law appears to apply only to EU legislation (Regulations and Directives). However, EU law does not only comprise EU legislation. The Government will need to decide an approach in relation to:

(a) decisions of the Council or Commission, which have direct effect in the UK if addressed to the UK;

(b) certain general principles of EU law such as proportionality which also have direct effect in the UK; and

(c) CJEU judgments, which currently create binding precedents for the UK courts in relation to interpretation of all the EU law that the Great Repeal Act will transpose.

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To what extent could the European Court continue to influence UK law?

It is unclear how much weight UK courts will be expected to give to CJEU judgments post-Brexit. Any agreement establishing an implementation phase would most likely require the continued jurisdiction of the CJEU during the interim period.

Moreover, the UK could be required to comply with CJEU judgments that predate the final agreement with the EU. It is clear from previous sector-specific agreements the EU has made with non-EU states that the jurisprudence of the CJEU can be "frozen" in time with the non-EU state required to give effect to relevant CJEU decisions that predate the agreement but not to any future judgments.

Even if the UK courts are not required to have any formal regard for CJEU judgments, it is likely that, in interpreting UK legislation that has materially replicated EU law, UK courts would continue to take account of relevant CJEU judgments for the foreseeable future. In particular, this is likely to be the case where the judgment relates to a non-political issue and is purely interpretive.

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What is the position of non-British EU nationals working in London and British nationals working elsewhere in the EU?

At the moment the principle of free movement of people continues to apply so there will be no change to EU workers' rights to live and work in the EU until Brexit takes effect. The UK Government has said that it will prioritise a deal with the EU that guarantees the reciprocal rights of residence of EU nationals currently working in the UK and UK nationals currently working in the EU (although it has not committed to unilaterally guaranteeing these rights).

It has been suggested that EU and UK nationals could rely on Article 70 of the Vienna Convention on the Law of Treaties that guarantees “acquired rights” of individuals in the event of the termination of a treaty. However, since there has never been a withdrawal from the EU, it is not clear how the acquired rights principle would apply in this context.

Following Brexit, the UK immigration system, as applied to EU workers, is likely to be a points based/tiered system (as for non-EU nationals) that provides for easier access for skilled workers.