The Brexit Legal Mess—Falling Into a Black Hole?

The Brexit Legal Mess—Falling Into a Black Hole?

JURIST Guest Columnist Larry Eaker, former Professor at the American University of Paris discusses the possible legal consequences of the UK’s decision to exit the EU…

As a historian, I fear Brexit could be the beginning of the destruction not only of the EU but also of Western political civilization in its entirety.

Donald Tusk, European Council President

Many will consider as mere hyperbole the statement of the President of the European Council, Donald Tusk, to the effect that the United Kingdom’s exit from the EU not only threatens the very existence of the EU but may, more importantly over the long term, aid in the undermining of the post-war global liberal order. However, populist and extreme nationalist political parties throughout Europe are not only succeeding in thwarting any further EU integration, but are currently gaining strength in their push to dismantle the EU and build walls between their European peoples. While this move will not, of course, at least within the near future, lead directly to all-out war between European neighbors as suffered twice in the Twentieth Century, this obsession with a return to complete sovereignty will most likely lead to a nasty “beggar thy neighbor” situation detrimental to the prosperity and freedoms of Europe’s population. And, sadly for the many highly-educated, dynamic and cosmopolitan young people of Europe, this move by the UK threatens the loss of their cherished four freedoms as provided by the terms of the EU treaties—the free movement of goods, services, people and capital concerning relations with that great island nation. Something their nations have painstakingly constructed since the devastation of World War II.

Clearly, the leaders of the EU need to be very careful and wise in handling the UK’s exit from the EU; simultaneously guiding the parties along a peaceful and prosperous path to separation while providing disincentives for other EU member states from following the UK out the door. While skilled politics and diplomacy will play a great role in meeting these goals, it must be considered that a clear and efficient legal framework for withdrawal will be necessary to accomplish the task. Unfortunately, however, the established legal framework providing for EU member state withdrawal is lacking in specifics and likely to lead to substantial legal uncertainty over an extended period of time. The now famous Article 50 of the Treaty of European Union[PDF]—added by the Treaty of Lisbon in 2009—provides for a two-year period of negotiations between the EU and the withdrawing member state from the date of filing the notice to withdraw in the hope of concluding an agreement on withdrawal. This agreement will be subject to guidelines set by the European Council’s heads of state/government, without the participation of the UK leader. Pursuant to Article 218(3) of the Treaty on the Functioning of the EU (TFEU), the actual text will then be negotiated by the Commission and finally approved by the Council via a qualified majority vote (QMV) of 27 ministers (minus the UK), once consented to by a majority vote of the EU Parliament. Referring to Article 238(3)(b) of the TFEU, QMV in this case must include at least 72 percent of the 27 member states representing at least 65 percent of the population. No ratifications by the remaining 27 EU member states will then be required in order to bring into effect the UK-EU withdrawal treaty.

Should the EU and UK fail to reach an agreement on withdrawal within the two-year period, then two scenarios are possible. Either the European Council extends the negotiating period via an unanimous vote of the remaining 27 heads of state/government or the UK could decide to walk away without an agreement. In any event, the writ of EU law—both primary and secondary—will continue to apply until either an agreement is concluded or the UK walks out the door following this two-year period. It should be noted that the Court of Justice of the EU enjoys the jurisdiction to hear challenges to the legality of any such withdrawal agreement during the negotiating period lodged by either the Council, Commission, member states, or the Parliament—which could of course seriously delay the conclusion of any UK-EU agreement. In any event, it appears apparent that the world will experience a lengthy period of economic, political and legal uncertainty stemming from this Article 50 process.

Economic, Political & Legal Uncertainties—The Brexit Conundrum
While this Brexit is likely to spring many surprises upon the world community over this extended period, I would like to discuss three of the most likely of the economic, political and legal uncertainties that must be confronted by the EU, the UK, and the world at large once the deed is done.

First of all, the most troubling uncertainty facing the UK and EU over this unknown period is the final form of trade and investment relations between these parties. As the world’s fifth largest economy and Europe’s second largest, the UK’s most important trading partner remains the EU—accounting for over 40 percent of the UK’s exports of goods and services and over 50 percent of her imports of goods and services. Unlike her trade in goods, she enjoys a healthy surplus in services trade with the EU, greatly due to her strong financial services industry. Almost half of her inward foreign direct investment stems from EU member states, being valued in 2014 at nearly 500 billion pounds. Thus, three of the four famous freedoms of the EU’s Internal Market are of upmost importance for the new UK; i.e., the freedom of movement of goods and services, along with the capital to service this trade and investment. Most economists might agree that the free movement of persons is necessary in order to support the movements of goods, services, and capital. But this is the conundrum created by the UK’s decision to abandon the EU ship—she wants to be able to enjoy the fruit of EU trade and investment, but without suffering—what her electors believe to be—the bitter burdens of the free movement of persons (especially emanating from Eastern European member states). Such attempt at so-called “cherry-picking” from the EU’s plate is very likely to fail, as can be inferred from her past attempts to do such.

Although the UK may be successful in negotiating a unique relationship with the EU providing for the free movement of goods, services, and capital without being bound by the free movement of persons (surprise number one), it remains most likely that the UK’s trade and investment relations will assume the form of one of three different existing models; to wit, the European Economic Area (EEA), Swiss, or World Trade Organization (WTO) models. It must be concluded that the WTO model, which governs most nations trade relations with the EU (so-called “third countries”), would not satisfy the appetites of the UK’s business class since it would not provide for tariff-free entry of UK goods to the EU and would be rather weak on services trade protections. It has the advantage, of course, of not impinging upon the UK’s sovereign right to strictly control the right of EU citizens to work and reside in the UK. Thus, nationalism and xenophobia could trump the pocket book following the zeal expressed by many UK voters to build such barriers to free movement.

Most discussion of possible UK negotiating strategy has focused upon the adoption of either an EEA or Swiss model of EU trade relations. The EEA model, as adopted by the European Free Trade Association (EFTA) members Norway, Liechtenstein, and Iceland, provides for the free movement of goods, services and capital but comes at a serious price—that of the free movement of persons. Ditto for the Swiss model; Switzerland being a member of EFTA but not an EEA member, thus involving a multitude of bilateral treaties between the Swiss and EU parties. In addition, both models involve the adoption of most of the famous EU acquis concerning the Internal Market—constituting the primary and secondary law protections adopted by the EU institutions over the years—but without the right to vote thereon. Finally, and perhaps most troubling for the UK majority voters, is the fact that these non-EU members are required to contribute significant financing to the EU for this privileged access to the EU’s Internal Market.

Therefore, it can be assumed that the UK will have extreme problems structuring their future trade and investment relations upon either the EEA or Swiss legal models. While a surprise is not out of the question, it is apparent that the EU will be very serious about imposing the free movement of persons in exchange for access to its coveted Internal Market of over 400 million persons. As proof, it should be noted that the EU has suspended negotiations with Switzerland concerning the Swiss demand to revise the existing free movement of persons agreement with the EU following their 2014 citizens’ referendum imposing a constitutional amendment restricting the right of foreigners to reside and work in Switzerland, including EU citizens. Importantly, the EU suspended such negotiations with Swiss authorities until the outcome of the UK referendum on EU withdrawal is known. Clearly, this was done in order not to prejudice the EU position on free movement of persons in the event the UK voted to withdraw and later demanded access to the Internal Market with no, or limited, EU citizen access to the UK. This being said, it is not out of the question that the EU might be willing to add a dose of “flexibility” to its demands for strict adhesion to free movement of persons protections—possibly with the use of a liberally drafted and applied “safeguard clause” allowing non-EU states to restrict access for EU citizens in the event of legitimate economic/labor market crisis situations (something which is at the heart of the on-going Swiss-EU dispute).

The second uncertainty concerns the possibility of a UK constitutional crisis and breakup of her constituent parts. While the referendum result is legally non-binding, the Cameron government has pledged to implement the people’s decision and to request his successor to file the withdrawal notice with the European Council following the upcoming leadership change. British legal scholars are pointing out, however, that the British Parliament has the final and binding word on this issue of EU membership and measures necessary to effectuate any legal withdrawal. Thus, what happens in the event of a failure of the Parliament to ratify the people’s choice? Will there be constituted within the Parliament the necessary votes to approve the EU withdrawal and extensive implementing legislation, especially since new parliamentary elections are not likely before 2020? This is no small matter since a majority of Parliament members are in fact in favor of remaining within the EU.

In addition to this possible legislative crisis, the UK government has now precipitated an existential crisis of her own. By voting to secede from the EU, the people of the UK have opened the doors to their own secession debacle. The First Minister of Scotland, Nicola Sturgeon, wasted no time in announcing her intention to schedule a second independence referendum in the near future—which, in light of the strong Scottish vote to remain in the EU, may well presage a breakup of the UK. She also announced the intention of the Scottish government to then seek accession to EU membership. If that’s not troubling enough for the English nationalists, the Deputy First Minister for Northern Ireland, Martin McGuinness, quickly demanded an independence referendum for the people of Northern Ireland with the eventual goal of joining the Republic of Ireland. Unfortunately for the British, they may well find themselves back in the throes of “The Troubles”—thus reaping the seeds of nationalism they have now sown in their own backyard.

The third uncertainty involves the UK’s relations with the world at large, and the US in particular. Many third countries enjoy bilateral trade and investment treaties with the EU greatly facilitating cross-border trade and investment and securing such with effective dispute resolution methods. Thus, the UK might be facing at least the temporary loss of trade and investment protections provided by such EU trade and investment treaties and the necessity of renegotiating the rights of UK businesses currently provided by such. Alas, the new UK may find itself at a distinct disadvantage when undertaking negotiations on these international economic relations, especially with powerful trading behemoths such as China. And while President Obama was quick to reaffirm the so-called US-UK “special relationship” following the referendum, it must be remembered that he had warned the British before the vote that the US would not automatically place the UK at the head of the line for the conclusion of free trade agreements with non-EU states following withdrawal. Although his successor may change that position, it cannot be ignored that the US has now lost its most powerful ally in support of the proposed US-EU Transatlantic Trade and Investment Partnership. This TTIP agreement is already in serious trouble not only in many EU nations, but also in the US itself with the announced opposition by Donald Trump and questioning by Hillary Clinton. Thus, it looks as if the UK’s trade and investment position with the US will be held in limbo for an extended period of time= —possibly longer than that necessary to reestablish trading relations with the EU. This does not portend well for US trade between, and investment within, a go-it-alone UK, essentially threatening the current use of the UK as an entry point into the EU Internal Market (with over $550 billion in US foreign direct investment settled in the UK).

Tying Up the Loose Ends of European Disintegration—Dismantling the UK’s Participation within the Common Agricultural/Fisheries/Transport/Competition & Foreign-Security Policies—Not to Mention the Harmonization of Product Standards & Environmental/Health/Human Rights Protections

While I was able to discuss three of the most obvious and important of the economic, political and legal uncertainties facing the UK following its momentous decision to leave the EU, it remains obvious that this divorce is going to create a Everest-high mountain of legal and regulatory uncertainties concerning the emerging UK stripped of over 50 years of EU acquis. New UK laws will be needed to either readopt, abandon or modify the treaty provisions and hundreds of EU directives and regulations impacting her agricultural, fisheries, and transport industries. The UK’s trade with the EU will of course be subject to existing EU product standards, environmental and health protections, and strict application of her competition policy. And, quite obviously considering the serious threats posed by Russian expansion and the Syria/Iraq wars, it will remain in the UK’s best interest to maintain close relations and coordination with the EU’s Common Foreign and Security Policy= —something that will not escape the watchful eye of other NATO members.

Finally, it should be noted that there exists a strong probability that any new conservative government in the UK, especially if closely in tune (or even aligned with) the nationalist parties, may well move to renounce the UK’s accession to the 1950 European Convention on Human Rights (ECHR) and submittal to the jurisdiction of the European Court of Human Rights (EctHR)—as now required by EU membership. Even David Cameron himself—not one known to be a rabid nationalist—has in the recent past questioned the continued UK adherence to the ECHR following several highly contentious EctHR decisions concerning the human rights protections enjoyed by alleged terrorists on UK soil.

By way of conclusion, I would like to mention the slight possibility that a new UK government may in the end thwart the people’s will as expressed in the referendum by withholding the filing of any Article 50 withdrawal notification while using the threat of such as a powerful bargaining chip in the upcoming negotiations (surprise number two). And, it is not out of the question that a new British government may schedule another referendum on EU membership should she be able to work out another, more flexible relationship with the EU (surprise number three). If she does in fact leave, let me sincerely wish my UK friends a smooth and prosperous national transition free from the constraints of EU membership. I can only hope that this divorce turns out to be amicable and advantageous for all parties concerned—especially for our children and grandchildren. But, unfortunately, such a positive outcome remains highly uncertain.

Larry Eaker is a former professor at the American University of Paris and Boston University. In France, Eaker has served as a legal consultant to the OECD on international environmental law matters and worked with various French law firms on international law cases. His teaching areas include public international law and international business law subjects.
Suggested citation: Larry Eaker, The Brexit Legal Mess—Falling into a Black Hole?, JURIST – Academic/Commentary, June 30, 2016, http://jurist.org/academic/2016/06/larry-eaker-breit-legal-mess-falling-into-a-black-hole.php.


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