European Union: Brexit - What Happens Now?

The government has deferred the vote on the Brexit deal that it has negotiated and the Prime Minister has also survived a dramatic leadership challenge from within her own party. Theresa May has been fond of saying that Brexit means Brexit. But what does it mean now and what can businesses do about it?

Can Theresa May salvage the deal?

The Prime Minister has now successfully fended off a leadership challenge from within her own party, but there is no certainty as to whether she will be able to obtain any real concessions from her counterparts in Europe.

In deferring the vote, Mrs May has stated that she wishes to secure reassurances from the EU27 around how the backstop arrangement in respect of Northern Ireland can be brought to an end.  It remains to be seen whether the actual text of the deal will change - as does whether any tweaks to the backstop alone will be sufficient to secure the backing of MPs for the current deal.

What happens if a renegotiated deal is defeated?

Should MPs reject the deal when it is eventually brought back to the Commons, the government will have 21 days to set out what it proposes to do next. MPs can shape the direction that the government will take through amendments to the motion that they vote on.

The only problem is that there is no consensus on what a viable alternative might look like, whether it should sanctioned through a second referendum, and indeed whether the EU27 will be prepared to tear up the current deal and start again. The judgment of the European Court of Justice that the UK can unilaterally pull out of the withdrawal process changes the dynamic as well, as the options are no longer the government's deal or no deal - but also include maintaining the status quo of full EU membership.

Do we have time for all this?

No, we don't. The UK is set to leave the EU on 29 March 2019. There are certain legal steps that will need to be taken to give legal effect to any deal that is eventually accepted by MPs. Going back to the EU27 on the current deal - or seeking to negotiate a new one - adds pressure to that already tight timeline.

If the deal is voted down, an extension is likely to be needed to the Article 50 timeframe in order to allow for an alternative to be agreed and further negotiations or a second referendum to take place. That would need unanimous agreement from the EU27, which is more likely to be secured to allow for the UK's own internal democratic process (such as a second referendum) rather than a renegotiation.

In the face of a refusal to extend, the UK may have no option but to withdraw the Article 50 notice, in order to avoid a 'no deal' Brexit - an option which has now been confirmed by the European Court of Justice.

What about a no deal scenario?

Without an extension, or a withdrawal from the Article 50 process, the UK will leave the EU on 29 March 2019 without any withdrawal agreement. That does not mean that there will be no deal at all. There may be a 'managed' no deal. For example, there will almost certainly be some very quick side deals to allow planes to land and electricity to flow through our interconnectors to mainland Europe. While we can also still seek to negotiate a future trade deal, even without a withdrawal agreement, this is likely to take many months, if not years. Such an agreement is likely to require that the UK commits to maintaining a level playing field with the EU, including through retention of current competition, state aid and health and safety laws. What can you do now? So there is still a substantial degree of uncertainty for businesses.

What can you do now?

With less than 60 working days until Brexit (29 March), prima facie, there is limited scope to what activities businesses can undertake by way of meaningful preparation for a "no deal" scenario.

With this is mind we have developed a curated suite of Brexit preparation services which are designed to be delivered at pace to help you stay ahead of the curve. These are the "low hanging fruit" of Brexit readiness and will minimise business disruption.

1. Understanding the political process

Things will move fast in the political sphere over the coming weeks as the government, Parliament and the rest of the EU seek to work out what to do next. Rarely have businesses needed to pay more attention to the political manoeuvrings in Westminster and Brussels.

Our experts can help you understand what is happening at the political level - explaining the processes behind the headlines, the views of the various camps and their possible repercussions.

2. One day "no deal" strategy workshop

Gowling WLG will host and lead a day of discussion and decision making with key business stakeholders. We will bring expertise to the table that can deep dive into the areas of most concern, whether that be supply chain, customs, employment or regulation, for example. The outcome of the workshop will include:

  • an understanding of the realistic range of Brexit outcomes and what these mean for your sector and business;
  • a tailor-made management report identifying specific risk areas; and
  • a documented action plan to address specific legal and / or regulatory concerns in the short and medium term.

3. Contract review

Many businesses have started to review, update, and draft new contractual terms and variations to minimise risk and exposure to additional costs from Brexit. Gowling can assist you to identify the current Brexit impact as it stands from a contractual perspective both on supply and customer side. During the process we will:

  • review existing customer and supplier contracts to identify risk and proposing drafting solutions to minimise those risks; and
  • update and, if required, amend template contracts so you are on the front foot in commercial negotiations after Brexit.

4. One day customs reporting and management training

Many businesses will need to file import and export declarations for the first time. Our customs experts will lead a one day workshop for up to ten participants with a focus on:

  • what data and information is needed to complete the customs declaration required to move goods across a customs border;
  • how to effectively engage and communicate with a customs broker to minimise compliance risk; and
  • how to minimise non-compliance risk in the short and long term.

5. "Stress test" existing Brexit planning

We will deploy our cross-sector expertise to ensure your existing Brexit planning has prepared your business in the following key areas, highlighting potential opportunities:

  • supply chain, logistics and route to market - reviewing contractual terms (including Incoterms) and procurement;
  • customs and trade - ensuring you can take advantage of applicable tax reliefs, maintain a robust internal import and export compliance programme, and efficiently calculate additional duty costs; and
  • regulatory - product regulation and approval processes will be changing, we can assist you to safeguard your regulatory compliance and cross-border trade.

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