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On 29 March 2017, the Prime Minister sent a letter to the President of the European Council formally triggering Article 50. The two year deadline to agree a Brexit deal has therefore commenced. In her letter, the Prime Minister proposed a number of key principles to shape the forthcoming negotiations between the UK and the European Union:
- the UK will not seek membership of the European single market but will instead seek to agree a Free Trade Agreement between the United Kingdom and the European Union. The Prime Minister states in the letter that any Free Trade Agreement can be agreed within the two year time period, given that the UK is an existing EU member state and that both sides have regulatory frameworks and standards that already match. As discussed below, the EU’s preference is, however, to agree an exit deal before negotiating any Free Trade Agreement;
- the status of EU citizens living in the UK, and UK citizens living elsewhere in the EU, should be placed at the heart of discussions. Both sides should aim to strike an early agreement about the rights of such citizens; and
- both sides should work to minimise disruption and give as much certainty as possible to investors, businesses and citizens. A phased transition has therefore been proposed in order to ensure a smooth path towards the new arrangements.
The Great Repeal Bill
On 30 March, the Government published a White Paper setting out how the Government intends to repeal the European Communities Act 1972 (which gives effect to EU law in the UK) by introducing a “Great Repeal Bill” (the “Bill”) at the start of the next parliamentary session. Key points from the White Paper include:
- where possible, the new legislation that will come into force the day the UK leaves the EU, will convert existing EU law (the “acquis”) into UK law;
- EU laws that cannot be transposed into UK law on the day of the UK’s exit will be amended or repealed using statutory instruments;
- amendments to EU laws transposed into UK law can be made the day after the UK has formally exited;
- the European Court of Justice (the “ECJ”) will have no jurisdiction in the UK and UK courts shall not be obligated to consider decisions of the ECJ. The UK courts, however, may refer to the case law of the ECJ as at the time of the UK’s exit; and
- both Houses of Parliament, the European Council and the European Parliament will have a vote on the final Brexit deal.
The EU’s planned three-phase approach to Brexit negotiations
Contrary to the Prime Minister’s suggested approach of negotiating a Free Trade Agreement at the same time as agreeing the terms of the UK’s exit, the EU wants a three-phase approach:
- Phase 1 = the withdrawal process – dealing with EU citizens’ rights and agreeing how to calculate the amount the UK owes the EU from previous financial commitments.
- Phase 2 = the future relationship – the outline for a Free Trade Agreement to be negotiated, rather than agreeing such a trade deal within the two year exit period.
- Phase 3 = the transition – free movement of labour, the sole authority of the EU courts to interpret EU rules around access to the single market, and financial contributions for the UK’s access to EU markets are all to be agreed.
As reported in our prior Brexit updates, notwithstanding that the formal process has now commenced, the situation remains complex and uncertain in many respects. In addition to the obvious questions raised above about the process and timing of the Brexit negotiations, in many cases there are likely to be multiple possible solutions as to whether or how existing EU laws are continued in UK law going forward. For now, as before, nothing has changed and, legally, the UK remains a full member of the EU until the end of the two year process mandated by Article 50. However, the landscape has definitely shifted towards what the future will look like and getting on with the process that has now started.
On a positive note for the UK, on 30 March it was announced that the shareholders of Heathrow Airport (including the China Investment Corporation and the Qatar Investment Authority) are planning to invest a further £650 million into the company during 2019 when the UK is set to exit the EU. This followed an announcement by Qatar shortly before the Prime Minister triggered Article 50 that it is committing an additional £5 billion of investment in the UK in the next three to five years.
We will continue to monitor and report on the issues raised in this alert from the perspective of our clients. Further updates will follow in due course.
In the blur of mega firms, Brown Rudnick stands out as a “global boutique” and has in place a multi-disciplinary, international Brexit Team. We are monitoring and analysing the consequences and considerations for businesses and are ready to advise on the potential legal implications of Brexit. The Brown Rudnick Brexit Team is available to advise on the issues across a broad range of sectors within our areas of expertise. If you have any questions please call your usual contact at Brown Rudnick or one of the following partners:
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