Article 50 and Brexit – an explanation

Prime Minister David Cameron has made it clear at a Brussels summit that the UK will not give formal notice that it is quitting the European Union until his successor is installed in Downing Street.

EU law and Article 50
That means that despite the Brexit majority in the 23 June referendum, it could be September before Britain invokes Article 50 of the Lisbon Treaty – the legal instrument under which a nation can serve notice that it intends to leave the EU.To the frustration of Jean-Claude Juncker, the European Commission president who has called for an "immediate" start to withdrawal negotiations, only the national government of a leaving nation can nominate the date that triggers the Article 50 procedure, which provides a two-year window for the EU and the departing country to agree, if possible, new arrangements for everything from trade to the movement of labour.Whether or not two years – during which the UK will remain an EU member –is long enough to reach such a comprehensive deal is open to doubt. Some experts predict it could take eight or even ten years to complete and, indeed, the remaining members of the EU can extend the two-year period, but only if all 27 remaining members agree.Germany's Chancellor Angela Merkel insisted on Tuesday that the UK would not be allowed to "cherry pick" the parts of its EU membership it wants to keep post-Brexit and said that, if it wanted continued access to the free trade area, it would have to accept the free movement of labour – the rejection of which was a key plank of the 'leave' campaign in the referendum.The problem is that neither the UK nor the remaining members of the EU really knows what, in practical terms, invoking Article 50 will mean, as it has never been used before.The Open Europe organisation says, "During the two-year negotiation period, EU laws would still apply to the UK. The UK would continue to participate in other EU business as normal, but it would not participate in internal EU discussions or decisions on its own withdrawal."On the EU side, the agreement would be negotiated by the European Commission following a mandate from EU ministers and concluded by EU governments 'acting by a qualified majority, after obtaining the consent of the European Parliament'. This means that the European Parliament would be an additional unpredictable factor in striking a deal."However, if the final agreement cuts across policy areas within the preserve of the member states, such as certain elements of services, transport and investment protection – as many recent EU FTAs have done (for example with Peru and with Columbia) – it will be classed as a ‘mixed agreement’ and require additional ratification by every national parliament in the EU."The EU treaties would also need to be amended to reflect the UK’s departure. In effect, this means that the final deal at the end of a negotiated UK exit from the EU would need to be ratified by EU leaders via a qualified majority vote, a majority in the European Parliament and by the remaining 27 national parliaments across the EU."And it is not only a deal with the EU that Britain has to reach. At present – and ignoring the continuing negotiations between the US and EU on a free trade deal – the European bloc has reached 22 trade agreements with individual nations around the globe and is party to five multi-lateral agreements covering multiple countries.In all it means that, unless agreement can be reached for the UK to hang on to the EU's coat-tails, the new government will have to renegotiate deals with 52 countries if it wants to retain preferential access to their markets.On the other side of the coin, of course, is the fact that the UK itself is a large and affluent market, so there is an obvious incentive for other nations to reach mutually-beneficial agreements.Also, other nations have successfully reached deals with the EU, though it is doubtful that all – or, maybe, any – would be suitable models for the UK.The most cited example is Norway, which is a member of European Economic Area (EEA) and has full access to single market. But it has to make a contribution to EU (a greater one on a per capita basis than the UK currently makes) and has no say in how the money is spent. And it has to accept EU laws and the free movement of labour.Switzerland, a member of the European Free Trade Association but not the EEA, has access to EU markets governed by a series of bilateral agreements. It makes a small financial contribution to the EU, does not have a general duty to apply EU laws but does have to implement some EU regulations to enable trade... and free movement currently applies.Prof Michael Dougan, a specialist in European Union law, told the BBC, "The Swiss signed their first framework agreement with the EU back in 1972 and they are still negotiating. They have now done well over 100 bilateral treaties to deal with particular issues as they go along – it is hardly comprehensive."Meanwhile, the Comprehensive Economic and Trade Agreement (Ceta) between the EU and Canada, which has been seven years in the making and is not yet in force, gives Canada preferential access to the EU single market. But it is unlikely to provide a model for the UK because it does not give Canadian financial services unfettered access to the EU – a key ingredient of any deal Britain might make.Prof Dougan added, "The overwhelming consensus is that these things do not take two years to negotiate, the rough guide that we are all talking about in the field is around 10 years."The treaty said that you have two years within which to make your divorce settlement. But the divorce settlement is completely separate from the framework agreement for your future relations with the EU. So what we will have is a period of two years to actually reach our divorce: the actual severance of ties between the UK and the EU."The main question that will arise is what do we do with the three million or so EU nationals currently living, working, studying in the UK... what do they do with the two million or so UK nationals currently living, working, studying in the rest of the EU?"And if such agreements cannot be reached by the time the two-year time limit under Article 50 expires and a Brexit becomes a reality, then, by default, World Trade Organisation (WTO) rules would apply, obliging both the UK and EU to apply on each other, the tariffs and other trade restrictions they apply to the rest of the world.

Read analysis of what the vote to leave the EU may mean for for the global mobility industry in Brexit is a reality – a new era for global mobility? by Relocate Global's managing editor, Fiona Murchie.

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