The UK has decided to leave the European Union ("EU")
with a 51.9% vote to "Leave" the EU against 48.1% to
"Remain". This note briefly sets out next steps over the
coming days, weeks and months and highlights some of the key issues
that firms will need to address during this time.
WHAT HAPPENS NOW?
As a result of the "Leave" vote, the UK government is
about to initiate a procedure to withdraw the UK's membership
of the EU. This is unlikely to happen until a new Prime Minister is
appointed in the UK, which is intended to be in October 2016.
The procedure for withdrawal from the EU is set out in Article
50 of the Treaty on European Union ("TEU"), which
envisages a two year period to negotiate a withdrawal
The TEU provides that the EU's treaties cease to apply to a
withdrawing state when a withdrawal agreement is in force, or,
failing that, two years after notification of the decision to
withdraw. This therefore poses a risk of a unilateral exit of the
UK from the EU two years from the date of a withdrawal notice being
submitted. However, it is possible that the UK and the
continuing members of the EU may agree to extend this period or
reach an interim agreement on future relations.
What is clear is that in the coming weeks and months, there will
need to be a substantial amount of inward and outward facing
leadership and discussion as to what will be the shape and form of
the UK's relationship with the EU going forward.
WHAT TYPE OF RELATIONSHIP WILL THE UK HAVE WITH THE EU GOING
There are a number of options available to the UK on exit from
the EU, including:
Membership of the European Economic
Area (the "EEA") (such as Norway). This allows access to
the EU's internal market without a vote on policy or
Customs union (such as Turkey);
Bilateral arrangements with the EU
(such as Switzerland);
Free trade agreement (such as
Continuing membership of World Trade
Organisation, relying on general international trading
At present, there has been no clear indication from the UK
government as to which model the UK will seek to pursue.
WHAT WILL BE THE IMMEDIATE EFFECT ON FINANCIAL SERVICES
EU membership provides for the freedom of movement of goods,
services, capital and people. How the UK's change in status
will affect the financial services markets in the UK is an open
question. It is clear, in the short term, that key EU legislation
that governs financial services institutions is unlikely to change.
Consequently, where firms are currently implementing EU
legislation, this process will need to continue.
It should be noted that some of the financial services
directives allow "third country" firms to access EU
markets, if the EU is satisfied that the third country's
law is "equivalent" to EU law. Much of the relevant UK
legislation in the financial services markets is based upon EU law
and therefore (at present) it is likely to be able to demonstrate
equivalence to allow for access to the EU markets under such
EU directives which do allow for third country access.
WHAT TYPES OF ISSUES MAY YOU WISH TO START THINKING ABOUT?
Given that we are at such an early stage, it is likely that much
of the practical steps may not be taken until later in the process
when the picture becomes clearer as to the 'direction of
travel' for the UK. Having said that, it is probably
appropriate for a firm to begin (if it has not already) to
formulate relevant working groups or focus groups to delve deeper
into the potential structural and contractual implications for its
operations in the UK and the EU. This may include looking at
the location of EU operations and the relevant rules and
legislation they are subject to, location and roles of employees
within the EU and assessing contractual obligations and relevant
changes required under a move away from the EU. This could be at a
basic level a review of definitions and references to EU
legislation to wider issues of interpretation and enforcement of
contractual provisions and the relevant laws governing such
WHAT OFFICIAL STATEMENTS HAVE BEEN MADE TODAY?
Various bodies have made statements today, including:
This timeline sets out some of the key dates and factors which
are likely to influence the next stages of the Brexit discussion,
including the environment in which the UK begins its negotiations
to exit the EU.
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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