We assess the key commercial and legal issues as Scots politicians press for a new independence vote in 2023.

On 28 June 2022 Nicola Sturgeon, Scotland's First Minister, announced plans to hold a second referendum on 19 October 2023 using the same question as in 2014: "Should Scotland be an independent country?"

This Q&A is a brief update to our Scottish independence: Impacts for Business hub.

If you would like to discuss any of these issues, please get in touch with your usual Herbert Smith Freehills contact or any contact on this or our related briefings linked to below.

  1. Is there an established mechanism for Scotland to hold an independence referendum?

Yes. Section 30 of the Scotland Act 1998 provides a mechanism to temporarily or permanently grant legislative powers to the Scottish Parliament. A section 30 order can be initiated either by the Scottish or UK Governments, but requires approval by both parliaments before becoming law. Scotland's first independence referendum was agreed on this basis.

In 2012, following the SNP's outright majority at the 2011 Scottish Parliament election, the Scottish and UK Governments signed the Edinburgh Agreement, which contained a draft section 30 order to allow a single question referendum provided it was held before 2015. The UK and Scottish Parliaments subsequently approved it and the referendum's legality was settled. The Scottish Parliament was granted control of key issues including the date, question wording and applicable franchise.

  1. So is a section 30 order the route to a second referendum proposed by the Scottish Government propose this time?

On 28 June 2022 the First minister's letter to the UK Prime Minister referenced her readiness to negotiate the terms of a Section 30 order. However, the UK Government have been clear that they would not agree a second referendum at this time. The focus of the letter, therefore, was on a referral to the UK's Supreme Court by the Scottish Government's Lord Advocate.

  1. What is the role of the Scottish Government's Lord Advocate in this?

Before new legislation can be introduced to the Scottish Parliament, the Scotland Act 1998 requires the Scottish Government Minister responsible to state if, in their view, the provisions are within the competence of the Scottish Parliament. The Minister reaches their view based on the independent advice of the Lord Advocate (and her deputy the Solicitor General).

No Minister has yet attempted to introduce new legislation in defiance of a Lord Advocate advising that it falls outside its competence. Amongst other things it would be a breach of the Scottish Ministerial Code.

The First Minister has pre-empted such advice needing to be sought at this time, by instead asking the Lord Advocate, several weeks ago, to consider making a referral to the UK's Supreme Court to determine if the draft legislation for a second referendum is within the Scottish Parliament's competence. The Lord Advocate agreed and made the reference on the 28 June 2022.

Proposed legislation for a second referendum was published on the same day. However, in line with the above approach, it has not yet been introduced to the Scottish Parliament.

  1. When will the Supreme Court hear the case?

At this stage the Supreme Court cannot confirm when, or indeed if, the case will be heard. However, it is possible hearings could be held in the autumn with a judgement by the end of the year.

  1. What chance of success does the Scottish Government have if the Supreme Court hears the case?

Section 29 of the Scotland Act 1998 provides that an Act of the Scottish Parliament is "not law so far as any provision of the Act is outside the legislative competence of the Parliament". Amongst other things, any provision which "relates to" matters "reserved" to the UK Parliament, which includes "the Union of the Kingdoms of Scotland and England" is outside that competence. It has generally been understood, albeit not accepted by the Scottish Government, that legislation for any referendum on Scottish independence would fall within this category.

Aside from questions of statutory interpretation, other constitutional debates could become relevant including, ultimately, between concepts of popular sovereignty, parliamentary sovereignty and the nature of the Union.

  1. Would the Scottish Government proceed with a referendum or independence against the law if the Supreme Court decided against it and the UK Government refused a second referendum?

In her statement to the Scottish Parliament on 28 June 2022, the First Minister repeated her position that "a referendum must be lawful" as a matter of principle, but also as a matter of "practical reality". A referendum held outside of official frameworks could be boycotted by unionists and would have no practical effect. Recognition by the international community is also important to the Scottish Government, particularly in the context of its proposal that an independent Scotland should apply to join the European Union.

In her statement, the First Minister did, however, state that if a second referendum was not possible under the law, then the next General Election "will be a 'de facto' referendum". The assumption is that this is envisaged as an opportunity for the Scottish electorate to "have their say", potentially applying pressure to persuade the UK Government it should agree to an official second referendum.

  1. Does this all boil down to the law?

In the short term at least, it seems likely that the question of whether there will be a second referendum will be settled by the law. In the longer term, politics will play a greater role.

As a matter of practical politics, it has been articulated in various ways by each UK Prime Minister from Margaret Thatcher onwards that Scotland ultimately has the right to self-determination. Given that it is a political question, what this means in practice in terms of any decision by a future UK Government to agree to a second referendum is not agreed or set out anywhere. Any number of factors will play a role, including: the amount of time since the first referendum, electoral politics in both the UK and Scottish Parliaments and the extent and consistency of the message sent by Scottish opinion polls on support for independence.

  1. What have recent opinion polls shown?

During 2020 and into the first quarter of 2021 opinion polls generally had moderate leads in favour of independence. However, since then polls have tended to show moderate leads against.

  1. Does the Scottish Government have a website hosting its various June 2022 announcements relating to its second referendum proposals?

Yes. It is available here.

  1. Where can I find out more about the potential impacts of Scottish independence for business and investors?

See our Scottish independence: Impacts for Business hub. It contains briefings on the following:

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.