The Decision To Leave The EU - What Next?

On Friday, 24 June, Gowling WLG hosted a live webinar giving clients the opportunity to discuss the potential impact of 'Brexit' with some of the firm's key partners. You can find the transcript from the webinar below.

Click here to view the webinar

An audio version of this webinar is also available for download.

Michael Luckman: Welcome to Gowling WLG's webinar on Brexit. This is an audio webinar, so I think one of the disadvantages to those of you who are listening in, and there are quite a few of you - I think we're billed to have some 300 joining this webinar - is that you are missing the collective looks of shock and surprise on the assembled panel who are going to share their views on what last night means for all of us.

Obviously the main purpose of this webinar is to encourage audience participation, so those of you who are listening in should have in front of you a webinar player which will have volume adjustment and full screen options on the bottom right hand side. The thing I would really encourage you to look at is the Ask a Question tab because what we really want to generate is a raft of interesting questions that our panel can reflect on and perhaps help answer.

Questions, when they come in, will be allocated with your name so if you want to ask a question anonymously I think the thing to do is, at the beginning of your question, just put in the word anonymous at the start and then we can make sure that is respected when the question is asked. We hope to get through most of the questions but there may well be one or two that we miss on the way through. We will be picking those up and follow up with you after the webinar if that is OK with you, but probably just to set the scene while questions are coming.

It is probably just best to remind ourselves well what does happen next, what is the framework, what is the mechanism by which we exit, perhaps what are the options after we exit, what are the kind of relationships and treaties we can make. I am going to start with Kieran Laird from our Public Regulatory Team who has been very much involved in the mechanics of exit. Kieran.

Kieran Laird: Thanks Michael. Good morning everyone. The first thing to remember is that legally nothing has actually changed this morning. We have woken up to a leave result but all of the EU law that we had yesterday still remains in place. Our Courts will still have to apply the treaties and the Court of Justice of the EU will still have to apply those treaties and anything brought before it also. That is going to remain the position for a few years to come in fact, so although there may be political and economic short term shock, there will not be much change legally over the next year or two and that is essentially because of the way the withdrawal process works.

The first thing that the Government would do would be to notify the European Council of an intention to withdraw from the European Union. That is still under Article 50 of the Treaty on European Union. Vote Leave over the last few weeks and months has floated the suggestion that there might be alternative ways to leave, for example in the same way that Greenland did so. However, to be honest politically and for various legal reasons they simply are not credible, so I think we are going to go for the Article 50 process. Now we do not have to immediately give notification to leave and the Prime Minister said in his resignation speech this morning that it would be for the new Prime Minister following his or her election in October to do so, so we are not even going to get started on this process for a couple of months.

Once we do give notification to leave we will then enter into a period of intense negotiations with the European Council, probably from the European Commission actually. What we will be negotiating is a thing called the withdrawal agreement, which will cover the terms of our exit from the EU and our future relationship with it. Now there is a timeline in which we are going to have to do that. Under Article 50 if we do not negotiate a withdrawal agreement and have it coming into force within two years, we will essentially leave the European Union without any alternative mechanism in place.

My colleague, Bernardine is going to come on in a few minutes to talk about what the options are but that would essentially mean that we reverted to the World Trade Organisation (WTO) rules so that two year period is extendable by agreement with all of the other European countries and to be honest it is probable that we will actually extend that period. Vote Leave have said that it will take about four years to negotiate a withdrawal agreement but to be honest an awful lot of other academic and Governmental projections put it between somewhere like four to nine years so we are not going anywhere fast, I have to say, with the law from the European Union remaining in place at least for another four years.

Michael: Thank you Kieran. We have got some questions coming in but just quickly before we start picking those up. Bernardine, who spends a lot of time in our Brussels office, what are the potential options?

Bernardine Adkins: I think it is useful to look at the different options because not only will it govern our relationship with the EU, it will also govern our relationship with what we call the Acquis Communautaire, in other words the existing EU rules that we have in our legislation. There are 75 possible models which have been canvassed from one extreme as to be in the force of a EEA agreement such as Norway and Iceland. That is likely to be unpalatable because essentially you are agreeing that the UK will be agreeing to be part of the EU trading block, but staying outside its formal structure for adoption of legislation. Essentially you are agreeing to the four freedoms, which include the freedom of workers which may be currently unpalatable and also it requires a sizeable contribution to the EU budget.

The other extreme is to be within the WTO where you will simply be another country viz-a-viz the EU such as India or Brazil, which is unlikely to happen. There is also a school of thought at the moment going through because the more recent rounds in the WTO with the EU and the UK have been agreed. The UK has agreed those rounds under the auspices of being an EU member and it's quality as a state is changing so clearly it's a question whether the UK will go back to square one within the WTO and have to engage in a series of rounds of agreement not only with the EU but also with its other trade partners as well.

So those are the two extremes. In between there we have essentially the Swiss model which I think is probably the most likely. The Swiss did originally want to be in the EEA negotiating extremely hard, but at the last minute pulled out. So what we have with the Swiss is a bundle of bilateral treaties which encompass some 100 different agreements, which primarily allows us to grant the Swiss access to the single market and they deal with such issues as freedom of capital, financial services, environmental operations and importantly also freedom of persons. So that is very much a possibility, sort of an a la carte type of agreement on a bilateral basis. The downside of that you have static agreements, bilateral agreements which are set to be frozen in time and you do not have a public dispute mechanism.

The other option is a UK EU free trade option, where essentially you just simply get into access to free trade including for financial services. Very fluid, not quite sure as to what that would encompass but it would be unlikely to accompany such things as the free movement of goods.

Then last, but no means least, is the Turkish option which is the good old fashioned customs union which would not extend to professional services but quite cheap in the sense that you do not have to contribute to the EU budget. Querying what it would look like because of the huge disparity in bargaining power between the EU and the UK and we would have tariffs then put on to UK goods, which ranges at the moment. The economic external tariff at the moment is 10% for cars, 11% for clothing, 15% for food for example.

Michael: OK there are some people with hearing issues. Just remind the speakers if they can speak up a little please. We have got a couple of specific questions coming in slightly tied to that point. Obviously there is quite a bit of legislation on the stocks at the moment. Peter Hall, who is our IT person, working in data protection, Martin Chitty in relation to employment. There is some existing stuff floating around. What is going to happen to that, the Data Protection Regulations is a very good example.

Peter Hall: OK so my best prediction on data protection is that we will end up with something like the new set of regulations in place anyway and the reason I say that is, if you look at the EEA countries for example, most of those have laws in line with EU data protection laws and there are good reasons for that. For example on things like data transfers, it makes a lot of sense to have laws aligned to allow free movement of data and therefore I think my best prediction on data protection would be that we will end up with something like the GDPR in place.

There may be some room for amending or lightening some of the burden of that regulation in our laws, but I think we will end up with something broadly aligned to the new regulations in place so my view for businesses on that particular area is tokeep looking at introducing what you need to comply with both in terms of your internal policies and your contracts over the next two years, on the assumption that we will end up with something looking like the GDPR anyway. And obviously we will know more about that as time progresses over the next two years.

Michael: Kieran I think you had a comment you wanted to add to that.

Kieran: One of the interesting things that touches on this question is the...