Brexecution

Breaking Up is Hard to Do: Why Step One in Brexit is Getting Delayed

By Shannon Togawa Mercer
Friday, August 19, 2016, 10:02 AM

Ministers in British Prime Minister Theresa May’s government indicated recently that they expect Britain’s official exit from the European Union to be delayed—maybe by a lot. Only a few weeks ago, we were careening towards Brexit. Now, the government is suggesting that it may not happen until the Autumn of 2019.

The exact timing of Brexit has been a moving target since former Prime Minister David Cameron’s resignation speech back in June. Initial predictions suggested that the new Prime Minister would begin the process of the U.K.’s disentanglement from the EU as early as October of 2016. But that timeframe quickly fell by the wayside. Once she took office, May indicated that she would begin the process in early 2017. Only a few weeks later, the beginning of the exit process has been pushed back again, perhaps to as late as Autumn of 2017. And that’s just the start of the two-year process.

Why is this delay important? Because deferring the Brexit part of Brexit—you know, the part where Britain actually leaves the EU—sustains all the uncertainty that has made the last few months so wrenching. The news has been thick of late with dramatic political predictions, minor scandals and inflammatory comments, but despite the spirited pre-Brexit campaign and post-Brexit tumult, the reality of the referendum is that it has not so far brought with it any immediate legal consequences. Yet it will.

While Brexit isn’t a national security issue per se, the withdrawal of the U.K. from the EU is one of the biggest international law stories of our time. It will change the EU permanently. It will redefine the models for political cooperation across states that transcend the traditional treaty system and, perhaps more immediately, it carries with it large implications for the movement of people, money, goods and information. So it necessarily carries major national security consequences.

This post is the first in a series which will attempt to cut to the legal heart of Brexit by describing the process of putting the referendum vote into meaningful legal practice—what we might call “Brexecution.” We start at the very beginning—with the U.K.’s now-delayed first step: the formal declaration of intent to leave the EU.

First, a bit of background: After some pressure to hold a referendum concerning the U.K.’s membership in the EU in 2012, David Cameron, committed to the vote if the Conservative Party was reelected in 2015. After his reelection, he set the gears in motion to hold the vote. On June 23, 52 percent of the United Kingdom voted in a referendum to exit the European Union. Voter turnout was 71.8 percent, (more than 30 million people). The vote was close and contentious. The two camps, “Leave” and “Remain,” were split geographically, culturally and socioeconomically. For instance, Scotland and Northern Ireland voted to remain, while Wales and England voted to exit. Many of those who supported Brexit in England were lower income individuals. Many who voted to remain were younger and living in urban areas; the most likely individuals to vote for Brexit were those aged over 60 years. Those who were born outside of the United Kingdom were highly likely to vote Remain. Being an outspoken supporter of Remain himself, Cameron announced his plan for resignation immediately after the referendum results were calculated.

Since the vote, the U.K. has experienced considerable political and economic instability. The value of the pound sterling has decreased from $1.50 on June 23 to $1.30 on August 16. The Bank of England cut interest rates to 0.25 percent from its pre-Brexit 0.5 percent, instituted a £100 billion scheme to ensure that banks pass the low interest rate on to consumers, and committed to buy £60 billion of UK government bonds and GBP 10 billion of corporate bonds as a means of stimulating the economy. Parliament has experienced its own upheaval. A good number of the opposition Labor party shadow ministers resigned in the days immediately following the vote. After David Cameron resigned from the post of Prime Minister on July 13, Theresa May, also a Tory Remain supporter, ascended to the position and quickly appointed both Brexit and Remain politicians to her government.

But here’s the thing: the Brexit vote itself—though it triggered all this turmoil—does not really do anything.

The primary treaty governing the relationship between the United Kingdom and the European Union is the the Treaty on the European Union as amended by the Treaty of Lisbon (for simplicity’s sake: the TEU). Under Article 50 of the TEU, the U.K’s first step is to notify the EU of its desire to withdraw. Everything before that is just domestic politics in the U.K. Only after the U.K. submits such a notice does anything happen. Once Article 50 notice happens, the EU then negotiates an agreement with the withdrawing state which outlines the process of the withdrawal, “taking into account the framework for its future relationship with the Union.” The relevant treaties continue to apply for two years after Article 50 is invoked unless the European Council and the member state agree, unanimously, to extend the period.

Here’s where the complexity begins: Because while notification seems like a simple step, the domestic authority and process to invoke Article 50 is actually unclear—starting with the small matter of who exactly gets to invoke it.

By July, seven private legal actions had been brought arguing that Parliament alone holds the power to invoke Article 50, not the Prime Minister. The crux of the problem is that, according to Article 50(1), any withdrawal from the European Union must be made “in accordance with [the country’s] constitutional requirements.”

Determining which body of government has the power to begin the process of withdrawal is thus a question of British constitutional law, and not an easy one at that. When Cameron resigned, he said, “I think it is right that the new Prime Minister takes the decision about when to trigger Article 50 and start the formal and legal process of leaving the EU.” In that statement, Cameron took for granted that the Prime Minister has the authority to make this decision because of the “Royal Prerogative.” Prerogative Powers are those executive powers held by the Monarch, independent of statutory authority, and exercised by the Prime Minister in some instances, most often in the contexts of treaty-making, war and foreign affairs. Regarding foreign policy decisions, such as nominating the head of the European Commission or making EU budget requests, it would be acceptable for the Prime Minister to exercise prerogative powers and not have to consult Parliament. Government minister Oliver Letwin, and a number of government attorneys, have stated that Article 50 can be triggered using prerogative powers. The powers are defined as a matter of common law and not statute.

The trouble is that British common law has been clear about at least one limitation on the prerogative as early as Sir Edward Coke’s 1610 opinion in The Case of Proclamations: prerogative powers may not be exercised so as to countermand the will of Parliament. Lord Brown-Wilkinson further clarified the principle in the 1995 Fire Brigades Union Case stating, “it would be most surprising if, at the present day, prerogative powers could be validly exercised by the executive so as to frustrate the will of Parliament as expressed in a statute and, to an extent, to pre-empt the decision of Parliament whether or not to continue with the statutory scheme.” In essence, only legislation can override legislation. So the question is whether invoking Article 50 involves overriding legislation.

And that turns out to be a complicated question. The TEU is implemented in the U.K. through the European Communities Act of 1972 (ECA). The ECA, among a handful of other statutes, conveys a number of rights to the British people vis a vis the EU. Those of the opinion that only Parliament can invoke Article 50 argue that deciding to begin the process of withdrawal from the EU is equivalent to nullifying the rights granted the British people under the ECA and other laws. Other analysts argue that prerogative powers should take precedent, because the invocation of Article 50 alone does not mandate the repeal of the ECA or any other legislation; all Article 50 does is begin the process of withdrawal.

Whether an Article 50 invocation has to be an act of Parliament is only the first big question concerning the initial step. If this argument carries the day in the Supreme Courtand some analysts predict a decision will be made on this question by the Winter—it will set up another anticipated tangle in the process: Parliament, as a representative body, may determine that it is irresponsible to agree to invoke Article 50 without knowing the nature of the new relationship between the U.K. and the EU.

There are several possible legal and policy resolutions to this problem:

If the legal question described above suggests anything, it is that notification under Article 50 may take some time—hence the current delay. Unsurprisingly, this will not make the EU happy. The European Commission has been transparent about its desire for negotiations to begin as soon as possible. Just days after the referendum results were released, Jean Claude Juncker, President of the European Commission, pressured the U.K. government to begin negotiating immediately: “Britons decided yesterday that they want to leave the European Union, so it doesn’t make any sense to wait until October to try to negotiate the terms of their departure.” Juncker was not alone. In an emergency meeting in Berlin, foreign ministers from Belgium, Germany, France, Italy, Luxembourg and the Netherlands insisted that the U.K. begin the exit process at the earliest possible date, with the German minister emphasizing that they should “join together in saying that this process must begin as soon as possible, so we don’t end up in an extended limbo period.” In fact, Martin Schulz, the President of the European Parliament, told reporters that, within days of the Brexit vote, EU lawyers were looking into whether it was possible to speed up Article 50’s invocation; he added that he doubts that the timing of invoking Article 50 is exclusively the U.K.’s decision.

Some constitutional lawyers fear that if the U.K. takes too long to invoke Article 50, there is a risk that the EU may decide to construe the word “notify” in Article 50(2) broadly, and conclude that it has been sufficiently “notified” by the referendum itself and subsequent public statements of the government. This fear is likely unfounded given that Article 50 was intended to allow withdrawal by a state, not to allow other parties to force withdrawal upon a state. But it highlights the stakes. The EU wants speed. The U.K. wants an orderly process that allows it to sort through a complex set of internal constitutional and policy matters before diving off a cliff. This dynamic is what seems to be pushing everyone towards pre-negotiation.

Pre-negotiation is attractive both because it would allow Parliamentary approval of something relatively tangible and because it would allow negotiations to begin even while delaying a formal invocation. Article 50 imposes a two-year window during which the treaties continue to be in force while the EU and the U.K. negotiate the separation. At the end of those two years, without unanimous consent from the European Union to extend the period of time for the applicability of existing treaties, the U.K. is sent adrift into a sea of troubles. Once the U.K. invokes Article 50, the EU has the upper hand, having the exclusive power to grant an extension for negotiations. Given the current malign attitudes toward Brexit expressed by members of the European Parliament, it is questionable whether a unanimous agreement might actually be reached. It is far more likely that the timeline will be used as leverage in negotiations; the U.K. will almost undoubtedly be in a weaker negotiating position once it invokes Article 50. So the more pre-negotiation it can do, the better for the U.K. In addition, French and German elections are slated for 2017, and the U.K. might be hesitant to agree to a de facto time-limited negotiation without knowing with whom the country will be negotiating.

Michel Petite, the former director general of legal services at the European Commission, has interpreted the law to mandate that the withdrawal agreement be negotiated before the terms of the future relationship with the EU are settled. Technically speaking, the U.K. cannot negotiate items like trade until it is independent of the EU. Article 50(4) of the TEU is clear that, in the context of a withdrawal, the exiting state may not take part in discussions of the European Council or play a role in the decisions concerning it. Furthermore, while still a part of the EU, the state has ceded authority to the EU to negotiate many of its major treaties. Nevertheless, U.K. officials are pushing for a less strictly sequenced set of negotiations. Even Angela Merkel has expressed support for a parallel negotiation process: “These must be parallel processes because you cannot first cut ties and then figure out in another long negotiation process which relationship one enters.”

So is the pre-negotiation of exit terms possible? The U.K. government’s efforts and Merkel’s endorsement certainly make it seem so.

Is it legal? Sort of, and it’s probably legal enough. The language of Article 50 arguably lays out a procedure which requires notification before negotiation. But a treaty is merely an agreement between parties, and political realities may compel the parties to agree to a different order of operations. Moreover, the order of operations specified in Article 50 can’t prevent parties to future negotiations from reaching pre-cooked understandings if they feel like it. So as a practical matter, the law will not prevent pre-negotiation if both sides want to do it.

Is pre-negotiation likely? Yes. No matter how you slice it, the two year time frame for negotiation mandated by Article 50 is likely too short to encompass the complete and complex negotiation process that will have to take place. Negotiations will have to start with a meta-negotiation to determine the terms of the negotiation process. This alone will take up a significant amount of time and detract from the discussion of substantive agreements. Philip Hammond, foreign secretary under Cameron, has suggested that the process may take six years to complete. Past negotiations with the EU support the predictions of a longer timeline. For example, the 1985 Greenland Treaty, significantly less complex than the anticipated web of treaties that will bolster Brexit, took three years from the date of Greenland referendum and 100 negotiations to resolve. While there is no certainty around what Prime Minister May’s government will do in the time between now and Article 50 invocation, public statements made by her government alongside the U.K.’s negotiating position strongly suggest that some terms of the U.K.-EU exit negotiations will be outlined before the formal negotiation process begins.

The delay, at a minimum, prolongs the uncertainty of Brexit in an effort to facilitate such outlining, but it may do more than that. Some analysts have suggested that the more Article 50 invocation is delayed, the less likely it becomes that it will happen at all. Even Tony Blair has hinted that the will of the people as to Brexit may change if Article 50 is delayed. Interestingly, British bookmakers are betting 6/4 odds that Article 50 will be invoked later than 2018 or not at all. To add to Article 50 barriers, a Senior Tory Peer in the House of Lords has recently suggested that the upper house may delay the invocation of Article 50 if the decision goes through Parliament.

Whatever its cause and value to the negotiations, the delay does not bode well for the U.K. or Eurozone economies. Uncertainty about the U.K.’s future relationship with the EU will cause foreign investors to pause, employers to hesitate when hiring foreign employees, and development to slow in anticipation of the final treaties. Morgan Stanley, among other financial institutions such as Barclays, has suggested that the U.K. risks entering a recession by the end of the year, in part, because of the uncertainty “over how the UK’s relationship with the EU will develop, the potential for major political repercussions and economic consequences, and the lack of clear precedent….” That said, Morgan Stanley hedges its conclusion suggesting that the “slowdown could come through more slowly,” depending on how the investments are made in the U.K. and “if the policy response is less robust or uncertainty persists.” Barclays writes, “We expect that spiralling uncertainty will adversely affect firm and household confidence, forcing them to be more cautious and hold back on spending….” Pricewaterhouse Coopers predicts U.K. growth to decrease to 1.6 percent in 2016 and 0.6 percent in 2017, although it also predicts that the U.K. will avoid a recession. PwC attributes a decline in business investment to short-term economic and political uncertainty and long-term concerns about the future trade relationship between the U.K. and the EU. The IMF downgraded both its projections for UK growth and its projections for Eurozone growth post-Brexit. The deputy director of the IMF’s European department noted that investment and confidence are the IMF’s worries and if “risk aversion is protracted, it will weigh on investment and it will weigh on confidence.” Most negative predictions are qualified by uncertainty—and the U.K. government remains optimistic—but it is exactly that uncertainty that is cited when predicting the consequences of a lack of confidence in the stability of the U.K. and EU economic relationship.

And remember: all of this is just the first step in Brexit, the invocation of Article 50. The story doesn’t end there; in fact, this is where the work begins. Article 50 is merely a door, and whether opened before or after preliminary negotiations and by the Prime Minister or by Parliamentary vote, the U.K. and the EU will step through it into a labyrinth of relationships to reform, rebuild, repair or demolish. With 27 EU member nations and an already politically fractured U.K. government, this is bound to be one hell of a ride.