Brexit and business: a big week for people, process and legislation - what did we learn?

Published on 23rd Jun 2017

The UK Prime Minister’s attendance at the European Council, the opening of Article 50 negotiations, the Queen’s Speech, and the Mansion House speech: four events this week that may have advanced our understanding of how the UK government intends to pursue Brexit.

What did we learn from each?

The people: Theresa May at the European Council

The UK Prime Minister yesterday outlined to the European Council her opening position on the post-Brexit status of EU nationals living in the UK.  This is an offer that the UK side will hope is reciprocated by the EU with regard to the rights of UK citizens in the EU.

Mrs May’s summary of the UK’s position will be fleshed out when the UK publishes its formal position paper on citizens’ rights on Monday 26 June.  The overarching principle is that EU citizens living lawfully in the UK before the date of Brexit (expected but not certain to be March 2019) will be able to remain in the UK.  The main points appear to be:

  • EU citizens who have lived in the UK for five years would have ‘settled status’. The crucial issue will be the cut-off date for determining that five year period; the Prime Minister reportedly indicated that it would be no earlier than the date of the triggering of Article 50 (29 March 2017) and no later than the date of Brexit.
  • EU citizens arriving before the cut-off date but who have not been in the UK for five years would be able to remain until they are eligible for ‘settled status’.
  • The UK will resist the EU position that rights held by EU citizens settled in the UK be enforced by the European Court of Justice.

We await the government’s formal position for detail on all these points, and on the difficult questions around whether EU citizens in the UK can be joined by spouses and family members.

The process: Article 50 negotiations

At the start of the Article 50 discussions this week, lead UK negotiator David Davis gave Michel Barnier, his EU opposite number, a copy of ‘Regards vers Annapurna’, which describes one of the greatest feats of Himalayan climbing.  The co-author Maurice Herzog – who later became, like M. Barnier, a prominent French administrator and Gaullist politician – lost all his fingers and toes in becoming the first man to reach the summit of a 8,000 metre peak, a triumph that made him a national hero and led to him writing the best-selling mountaineering book of all time.  M. Barnier gave Mr Davis a walking stick.

This first Article 50 meeting agreed to follow the EU’s desired sequencing for the negotiations.  First: the rights of EU citizens in the UK, and of UK citizens in the EU; second, the financial settlement of the UK’s departure; and third; other separation issues, including Northern Ireland. Only when ‘sufficient progress’, as determined by the President of the European Council, has been made on these topics will the negotiations turn to the future trade relationship between the UK and the EU.

As many commentators pointed out, agreement to that sequencing is a climb-down by the UK side.  Though as Mr Davis retorted, it is also a cornerstone of the negotiations that ‘nothing is agreed until everything is agreed’, so perhaps the ordering of the negotiations is not of critical importance.  The meeting also agreed the terms of reference for the negotiations; a series of four-week meeting cycles running to October 2017.

The legislation: The Queen’s Speech

The Queen’s Speech on 21 June 2017 listed the legislation the UK government needs to ‘deliver’ Brexit.  Here is a summary:

Name of Bill Purpose Comments
Repeal Bill
  • Put all EU law existing on the day of Brexit into UK law ‘wherever practical’, and so provide certainty for businesses and individuals as to what is on the statute book.
  • Repeals the European Communities Act 1972, which established the primacy of EU law in the UK.
  • Creates temporary powers to make secondary legislation ‘enabling corrections to be made to the laws that do not operate appropriately’ once the UK has left the EU.
  • Replicates the common UK frameworks created by EU law in UK law, and maintains the scope of devolved decision-making powers in the UK.
  • Formerly described by the government as the ‘Great’ Repeal Bill, the title appears to have been downgraded in light of the utilitarian purposes of the Bill.
  • Any use of ‘Henry VIII clauses’ to limit Parliamentary scrutiny of secondary legislation will be controversial.
Customs Bill
  • Enable the UK to introduce a standalone domestic customs and indirect taxes regime, including charging customs duties on imported goods, controlling the import and export of goods, and accommodate whatever is negotiated with the EU.
  • This legislation will be ‘mostly based on current EU law’ in order to ‘provide certainty for business’.
  • The UK is currently in the Customs Union, so it has no standalone customs regime.
  • One will need to be built if the UK leaves the Customs Union, and the Bill puts in place the legal framework to do this.
Trade Bill
  • ‘To cement the UK’s leading role as a great, global trading nation, whilst ensuring UK businesses are protected from unfair trading practices’
  • ‘To establish the tools we [the UK] need to deliver the best international trading framework for the UK outside the EU, including an effective trade remedies regime’.
  • Not immediately clear what this means in legislative terms.
Immigration Bill
  • To allow the repeal of EU law on immigration, in particular free movement.
  • That law will be converted into UK law by the Repeal Bill.
  • And so the migration of EU nationals and their family members can be made subject to UK law after Brexit – that is, EU nationals can be brought into the UK’s immigration system.
International Sanctions Bill
  • To provide a domestic legislative framework to enable the UK to continue to impose, update and lift sanctions regimes.
  • This will ‘return decision-making on non-UK sanctions to the UK’.
  • Appears to be principally mechanistic.

There are also Brexit-related Fisheries, Agriculture and Nuclear Safeguards Bills.

The transition: The Mansion House speech

Philip Hammond, the UK Chancellor of the Exchequer, gave his Mansion House speech this week.  Traditionally, this is a tour d’horizon of the UK economy.  Mr Hammond took the opportunity to carry out some Brexit positioning, stressing the need for ‘mutually beneficial transitional arrangements to avoid unnecessary disruption and dangerous cliff edges’.

This recognises that any comprehensive free trade deal with the EU is unlikely to be completed by 2019, and argues for a substantive and possibly lengthy set of transitional arrangements. That the move from one regime to another be as smooth, certain and comprehensible as possible is an important issues for business.

The Chancellor also described the three principles he would like followed for the regulation of financial services after Brexit:

‘First, we will need a new process for establishing regulatory requirements for cross-border business between the UK and EU. It must be evidence-based, symmetrical, and transparent. And it must reflect international standards.

Second, cooperation arrangements must be reciprocal, reliable, and prioritise financial stability. Crucially they must enable timely and coordinated risk management on both sides.

Third, these arrangements must be permanent and reliable for the businesses regulated under these regimes.’

In doing so, he argued that getting these regulatory and supervisory regimes right is crucial not just to the UK economy, but also to the EU economy as ‘60% of all EU capital markets activity is executed through the UK’. 

The next negotiating round in the Article 50 process is in the week commencing 17 July 2017.  Before that, the UK government must survive next week’s Parliamentary votes on the Queen’s Speech.

Our dedicated Brexit pages have more analysis on Brexit: challenges and opportunities in a changing world of international trade, and our local experts can help you to understand what Brexit could mean for your business – in terms of overall impact and at the detailed operational level.

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* This article is current as of the date of its publication and does not necessarily reflect the present state of the law or relevant regulation.

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