Article 50 – UK Supreme Court Judgment and Parliamentary Vote

Last week the UK’s Supreme Court upheld the High Court’s November ruling (reported on in a previous post), rejecting by an 8:3 majority the government’s contention that it should be entitled to trigger Article 50 without the backing of Parliament. The government did however secure a political victory by virtue of the Supreme Court ruling, unanimously, that the devolved administrations of Scotland, Wales and Northern Ireland were not – by virtue of the Sewel Convention or otherwise – entitled to veto Westminster’s decision to trigger Article 50.

The government’s failed appeal against the original decision was widely anticipated. In fact, the comparative warp speed of subsequent political developments have led some to suggest that the appeal was in part motivated by the government needing those intervening weeks to draw up a suitable draft bill and advanced stage white paper which could be rolled out promptly following the court’s ruling, rather than be seen as slow to act following the High Court’s original verdict.

Within 2 days of the Supreme Court’s 24 January judgment in R (Miller and Santos) v Secretary of State for Exiting the European Union, [2017] UKSC 5 (please see here for the full text of the 24 January judgment, and a useful press summary here), the Department for Exiting the European Union published a draft of the European Union (Notification of Withdrawal) Bill (Brexit Bill).  The government was keen to craft a short ‘bombproof’ bill, and at less than 140 words it was one of the shortest on record.

The Brexit Bill saw its second reading in the House of Commons on 31 January and 1 February, with MPs engaging in impassioned debate for close to 15 hours across the two sessions before voting in favour of it by a 5-to-1 margin. Many might be surprised, given that the electorate voted ‘out’ in a referendum some 7 months ago, that this effectively represents only the first stage in a 2+ year process of the UK extricating itself from the EU.

The Brexit Bill will now move to third reading and committee stage next week (6-8 February) and we have already seen over 100 amendments to the bill tabled for discussion at committee stage. Given the anticipated opposition the bill will face in the House of Lords, it is likely that it will be subject to amendment before it gets there.  The government has today published a white paper setting out its negotiating aims for Brexit although, as was to be expected given Theresa May’s stated aim of providing “no running commentary” on the negotiations, it does not appear to have revealed much beyond previous government pronouncements (including in particular the 12 broad aims set out by the Prime Minister in her 17 January speech to assembled diplomats at a function in Central London).

A London-based lawyer has crowdfunded £70,000 with a view to asking courts in Ireland to make a reference to the Court of Justice on the European Union, to determine whether an Article 50 notice is revocable once sent. Some also point to the 1969 Vienna Convention on the Law of Treaties, which provides that, absent specific arrangements to be contrary, notification of an intention to withdraw from a treaty “may be revoked at any time after it takes effect” (although it must be said that the degree to which the EU treaties enshrine EU law into member states’ domestic law puts them on a different footing to most if not all other international treaties).  Even without this, or another, reference to the CJEU on the question of revocability, the 2-year negotiation period laid down in the Lisbon Treaty now looks set to commence within weeks.

Businesses and consumers remain wary (or should that be weary). The 27 other EU member states and the EU institutions have, since the June 2016 referendum, made clear that the future economic and political stability of the union depends on the indivisibility of the EU’s four founding freedoms.  The UK government, however, appears to remain committed to a new order where control over immigration is not at odds with tariff-free access to the single market, and may in fact take precedence over it in negotiations (at least that appears to be a political red line).  Something has to give…

It is difficult to reconcile the government’s recent suggestion that departing from the EU without an exit agreement after 2 years should hold no fears – that “no deal is better than a bad deal” – with plenty of expert analysis to the contrary.  In its recent report on the Brexit process, the House of Commons’ Select Committee for Existing the European Union concludes that “it would be unsatisfactory and potentially damaging to both sides were the UK to leave the EU with no agreement having been reached” and that “a return to tariffs and other regulatory and bureaucratic impediments to trade would not be in the interests of UK businesses”.

It is to be hoped that progress and clarity will be swift, and that businesses can look forward to making informed decisions rather than ones designed to stave off potential unknown risks. Please contact Max Beazley or your regular Dorsey contact should you wish to discuss how Brexit may affect you or your business, and we look forward to keeping our readers updated in the weeks and months to come.

Max Beazley

Max’s primary practice focus is on cross-border M&A and equity capital markets. Max has extensive experience with UK domestic and cross-border private and public acquisitions and divestitures. Max also advises banks and issuers on IPOs and secondary issues, both on AIM and the Main Market of the London Stock Exchange. Max advises on private equity, venture capital and angel investments, as well as on banking and finance transactions. In addition, EU and US companies look to Max for advice on the UK and EU securities law elements of cross-border fundraising transactions and on UK corporate governance and compliance matters.

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