UK: Brexit - The EU Referendum 23 June 2016

Last Updated: 4 May 2016
Article by Charles Whiddington, David Knight and Philip Abbott

The clock is ticking towards the June Referendum and increasingly people are asking questions about the nature of the EU, what the UK's relationship with it is and what the legal consequences of an 'out' vote might be for businesses and individuals.  In the event that the UK votes to quit the EU, it is clear that there will be a lengthy period of several years of uncertainty as the journey towards an exit is navigated.  Businesses will face uncertainties as to the legal implications and will need contingency plans to deal with circumstances as the shape of a Brexit unfolds. 

Briefing papers

Competition and EU Regulatory - Possible implications of Brexit in Competition law

Intellectual Property - What would a Brexit mean for IP rights? 

Financial Services - Brexit and Financial Services

Finance - BREXIT – Documentation Issues for lenders and hedge provider

Legal - Why leaving the EU would be a disaster for lawyers

Factual Background to the EU

 1.  What is the EU?

There are 28 member states which are joined under a set of Treaties.  Each member state is sovereign and they have come together to share sovereignty in certain specified areas.  There are four key freedoms which all member states subscribe to under the Treaty: free movement of capital, workers, services and goods. 

2. What is the single market?

The idea of the single market lies at the heart of the EU.  It used to be referred to as 'the common market' and aims to make it as easy to trade between Manchester and Margate as between Manchester and Milan.  It is the four pillars of free movement which support the single market: the principles of free movement of capital, workers, services and goods. They are core to the EU's existence. 

3. Is the European Convention on Human Rights part of the EU?

It is not.  The EU and the Council of Europe which adopted the European Convention on Human Rights, are quite separate and distinct.  They are different and if there is a vote to leave the EU; we will still be a signatory to the ECHR; we will still be a member of the Council of Europe; and we will continue to be bound by the Convention.  If a UK government wishes to revoke its adherence to the ECHR or to withdraw from membership of the Council of Europe, it will have to do this by separate legislative action.  If we leave the EU we will still be bound by the ECHR.

4.  What does shared sovereignty mean?

It is asserted by some that when the UK joined the EU and signed up to the idea of the single market, it was only as a free trade zone which did not involve the transfer or sharing of any sovereignty. In fact, this is not correct.   The UK Parliament is sovereign as a fundamental principle of constitutional law.  The way in which EU Treaties have effect under UK law and why EU institutions can pass laws which directly affect the UK, is through the European Communities Act 1972.   The UK chose to recognise the supremacy of EU law and to incorporate it into domestic UK law. 

5.  How would the UK leave the EU?

Every member state has the right to leave the EU under A.50 of the EU Treaty.  But the procedure (set out in the Lisbon Treaty) is not designed to make it easy and it has only been exercised once – by Greenland.  It is designed to be difficult because member states are not encouraged to leave.  The exit procedure is a Treaty obligation and the suggestion from some quarters that the UK could simply repeal the European Communities Act 1972, ignore (i) the consequences for the UK's reputation internationally for repudiating a solemn treaty obligation; (ii) repeal involves a review of approximately 7,000 pieces of legislation; and (iii) the fact that such a course of action would hardly be likely to produce a favourable trade deal with the EU.

6.  If the UK votes to leave what are the alternative options it might choose?

A number of options have been floated for the relationship between the UK and the EU post-Brexit.  Some of these reflect existing deals, but none reflect the more a-la-carte model suggested by some Leave proponents.  It is important to note that any bespoke deal the UK negotiated with the EU would have to comply with WTO rules: if it does not negotiate a free trade agreement or join a customs union under WTO rules, any deal it attempts to negotiate would have to be offered by the EU to all other WTO members.  This might severely limit the UK's and the EU's freedom of manoeuvre.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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