Everything you ever wanted to know about Brexit but were afraid to ask…

Everything you ever wanted to know about Brexit but were afraid to ask…

9 November, 2018 by Gilson Gray in Blog

The debate around Brexit rages on. Will there be a deal, won’t there? Should there be a second referendum? What are the terms of exit? Honestly, who knows? These are matters of politics and diplomacy. Instead, I thought I’d take a look at what legal changes we know will occur if and when Brexit happens.

The end of European Law in the UK?

The key legislation is the European Union (Withdrawal) Act 2018 (the “2018 Act”). Section 1 says “The European Communities Act 1972 is repealed on exit day”. Exit day is defined as 29 March 2019 at 11pm (midnight CET). The European Communities Act 1972 gives effect to EU law in the UK. So section 1 of the 2018 Act immediately stops all EU law that has effect in the UK from having effect in the UK. There is a lot of EU law in the UK. This would create chaos.

So, sections 2 and 3 (and 4) of the 2018 Act basically say that all EU law that currently applies in the UK, whether as Directives or Regulations (and a few other bits and pieces) are and remain the law in the UK. Sections 5, 6 and 7 of the 2018 Act explains how we interpret law after exit day. The rules here are very complicated and are likely to keep lawyers in business for many years.

Sections 8 and 9 of the 2018 Act give UK Government ministers wide temporary powers to make new laws to sort out gaps and issues that arise from the inevitable morass that the summary approach of the 2018 Act will create in law.

What happens on exit day?

On exit day, UK law in practical terms will look pretty much the same as the day before. So workers will have the same rights, consumers will have the same rights, GDPR will still apply, the same procurement procedures will apply when tendering for Government contracts. But from exit day, the UK will be able to change UK law and start diverging from the EU. And this diverging will start sooner than you might think, because EU laws will change, but the UK will not necessarily change its rules to bring them into line.

Business in the UK will not suddenly become an unregulated Wild West. We will keep applying the same rules as before. But the rules will change over time, as they always do, and the point of Brexit is that UK rules evolve in their own direction, away from the EU. This is what makes Brexit so difficult.

What is the Single Market and Customs Union?

The Single Market is the set of rules that allows Member States to trade with each other without friction, so by having common standards and mutual recognition of standards in respect of goods (i.e., no “non-tariff barriers”), no tariff barriers (i.e., no duty or customs on products); money (capital) freely moving around and between the Member States; services being provided by someone in one Member State to someone in another Member State without restrictions; and allowing workers from one Member State to work and live in another Member State.

The Customs Union is a set of rules about the rules and tariffs to apply to goods being imported from outside the EU. If Member States applied different rules and tariffs to imports from outside the EU, they could gain a competitive advantage over other Member States.

 

What does a deal mean?

In leaving the Single Market and Customs Union, the UK necessarily creates trade barriers between itself and the EU. This is because the Single Market and the Customs Union are designed to facilitate free trade between Member States. To preserve the integrity of the Single Market and the Customs Union, the EU is unlikely to afford a non-Member State the same rights to trade (i.e., trade without barriers) as a Member State. Therefore, some sort of trade barriers between the UK and EU seem inevitable.

The UK intends to leave the Single Market and the Customs Union. The EU intends to preserve the integrity of the Single Market and the Customs Union. This will mean new trade barriers being erected. Assuming the UK and EU want to continue to trade freely, under WTO rules, they will need to have a free trade deal in place. For both parties, that free trade deal will have to mean less “free trade” than the existing Single Market and Customs Union.

The purpose of the exit deal is to allow the UK a smooth transition from Member State of the EU to Non-Member state, to reduce disruption and to allow barriers to go up gradually. No deal means the barriers go up abruptly at 11pm on 29 March 2019 and trade stopping suddenly.

What does “no deal” mean?

If the UK and the EU cannot do a deal, then the EU would likely impose stringent checks and barriers on the UK’s exports to the EU in order to preserve the integrity of the Single Market and the Customs Union. The UK could well retaliate, and may have to, to comply with WTO rules. These barriers could cause long delays at ports as goods are checked and difficulties moving people between countries.

The UK doesn’t have to impose any barriers on imports to it from the EU. However, because the UK would probably default to WTO terms the UK would find it difficult to impose barriers on imports from anywhere else in the world. Very simply, a member of the WTO must treat all other countries in the same way except for those with which it has entered into a free trade agreement.

All of this could put tremendous pressure on UK business – who would find themselves competing against 160 countries on unequal terms. But the disruption would not stop there: it would be unclear whether planes could fly, data could be transferred, people could travel, goods could be sold, services delivered, people could continue to live where they want, students could go on secondment, businesses could find staff.

In summary

Brexit with a deal means an orderly transition from Member State to Non-Member State, but will undoubtedly make European trade more difficult for the UK and will likely increase uncertainty and confusion in both domestic and international law.

Brexit without a deal means a sudden conversion from Member State to Non-Member State, with the likelihood of a tremendous amount of uncertainty and confusion happening in fairly short order.

For more information, contact:

Andrew Fleetwood
Mobile: 07841 920101
Direct Dial: 0131 516 5365
Email: afleetwood@gilsongray.co.uk

 

The information and opinions contained in this blog are for information only. They are not intended to constitute advice and should not be relied upon or considered as a replacement for advice. Before acting on any of the information contained in this blog, please seek specific advice from Gilson Gray.