On 23 June 2016, the United Kingdom voted to leave the European Union by 51.9% to 48.1%. In our post-referendum Brexit briefing, we summarised the required next steps, the five possible models that had been the subject of discussion leading up to the referendum and the legal implications of Brexit.
Following Theresa May's speech to the Conservative Party Conference in early October 2016, the timing and shape of Brexit has now become clearer.
The Central Bank of Ireland has also provided some clarity on its approach to institutions considering relocating their operations from the UK to Ireland.
TRIGGERING ARTICLE 50
As discussed in our post-referendum Brexit briefing, the UK Government must serve notice on the European Council under Article 50 of the Treaty on European Union before Brexit negotiations can start. Theresa May confirmed that this will take place before the end of March 2017. Unless the two year negotiation period is extended by unanimous agreement at the European Council, the UK will exit the EU by March 2019.
The UK Government's ability to serve notice under Article 50 without the involvement of Parliament has been challenged. While Theresa May has agreed to a parliamentary debate on Brexit before serving the Article 50 notice, she has not agreed to a parliamentary vote on the Government's Brexit strategy, and has emphasised that "...[it] is up to the Government to trigger Article Fifty and the Government alone".
THE 'GREAT REPEAL BILL'
A significant open question since the June 2016 vote in favour of Brexit was how the UK would deal with the significant body of EU law that currently applies in the UK. In her speech, Theresa May confirmed that:
- a 'Great Repeal Bill' will be presented shortly to Parliament pursuant to which, with effect from the date that Brexit formally takes place, the European Communities Act 1972 (which gives effect to EU law in the UK) will cease to apply and the existing body of EU law will be converted into UK law – this is with a view to providing "maximum certainty" at the time of Brexit as to what laws will apply immediately thereafter; and
- Parliament can subsequently amend or repeal any of those laws, but this will have to take place in accordance with the normal procedures for amending or repealing UK law.
WHAT FORM MIGHT BREXIT TAKE?
The phrases "Brexit means Brexit" and "hard Brexit" have been much used in the media recently. While Theresa May has emphasised that she will not be providing continuous updates on the state of play of the Brexit negotiations while they take place (but acknowledged that the public will be kept informed on key aspects), she stated that "...it is not going to be a "Norway model. It's not going to be a "Switzerland model"..." It remains to be seen whether the UK can negotiate its own unique relationship with the EU, but many commentators took Theresa May's words at the Conservative Party Conference to mean that a "hard Brexit" is perhaps likely. Equally, much will depend on what mandate is given to the EU's negotiation team and how they will view the UK's apparent wish to benefit from access to the single market, while having freedom to set its own immigration controls.
If a negotiated agreement is not reached by March 2019, and the European Council does not unanimously agree to extend the negotiation period, the WTO model (outlined in our post-referendum Brexit briefing) seems the most likely outcome ("hard Brexit" in its most extreme form). However, this arrangement would not cover financial services as passporting would not be available and, unless it negotiated a specific agreement with the EU, the UK would not be able to carry out financial services business in the EU on terms more favourable than any other third country.
FINANCIAL SERVICES – CENTRAL BANK SPEECHES
In a speech delivered on 3 October 2016, the Central Bank's Director of Policy and Risk, Gerry Cross, outlined the implications of Brexit on the Central Bank's supervisory and regulatory work. He noted the potential for a significant increase in the number of applicants applying for authorisation in Ireland if passporting may no longer be available, and stated that the Central Bank was open to engagement in this area (the Central Bank's Director of Credit Institutions Supervision, Ed Sibley, has also noted that the Central Bank is keeping a "broadly neutral view" on this point). Gerry Cross did, however, reiterate that the Central Bank expects any applicant to intend to have a "substantive presence" in Ireland, with its "mind and will" located here. In his speech, which focused on credit institutions, Ed Sibley also reiterated the need for "mind and management" to be located in Ireland, with any outsourcing arrangements being well-managed.
LEGAL IMPLICATIONS OF BREXIT
In our post-referendum Brexit briefing, we mentioned a wide range of areas which will need to be considered in detail once the form of Brexit becomes clear. Despite now knowing when notice under Article 50 will be served, it will not be until the UK-EU negotiations formally get underway (most likely around the start of Q2 2017) that the possible shape of Brexit will become clearer, enabling the implications of Brexit on those areas to be considered in more detail.
This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.