HFW Briefing – Brexit negotiations begin now: business must prepare

Comment, European Union, News, Politics and Government — By on June 9, 2017 at 4:57 PM

Brian Perrott

The votes have been counted and the Conservatives, who failed to maintain a majority, remain the largest party. Theresa May has confirmed that she will continue as Prime Minister and has this afternoon been invited by the Queen to form a government, working with Northern Ireland’s Democratic Unionist Party.

What can we expect now?

Very few details have been released. What we do know is:

  • The EU’s chief negotiator, Michel Barnier, who will represent all the other 27 Member States, is keen to commence negotiations on a phased approach (see below) in earnest on 19 June – almost a year to the day on which the referendum was held. The phased approach was resisted by the government, which prefers to deal with all the issues together, a stance which reflects the wording of Article 50 of the Treaty on European Union.
  • The talks will start on a fairly fractious footing. Due to purdah1 the UK was unable to enter into pre-negotiating scoping out talks which was viewed as obstructive behaviour by the EU. The EU and UK are entrenched in opposite positions on the discussion of, and agreement to, an exit payment of €100 billion (approx £85.8 billion).
  • Where disputes arise between the EU and the UK, there is a question whether these should be resolved by the Court of Justice of the European Union (ECJ) – an interesting dynamic from the UK’s perspective.

Anthony Woolwich

What does this mean for you?

The vote of confidence the election has given the government is likely to see a ‘business as usual’ approach to the negotiations.

Businesses still need to plan and structure themselves without knowing the outcome of the negotiations.

For some regulated businesses contingency planning is already required by their regulators, for example banks, insurers, and designated investment firms engaging in UK/EU cross border activities are required to submit contingency plans to the Bank of England by next month.

In light of this, we maintain our advice that businesses should, and as in the above cases must, continue with their contingency plans, to include a review of:

  • Opportunities and risks.
  • Regulatory requirements.
  • Passporting requirements.
  • Employment issues.
  • Contracts, including dispute resolution clauses; and commercial relationships.

The EU’s Proposed Agenda and the Timescales:

Phase 1 from June – December 2017 Negotiations to include:

  • Citizens’ rights (those of the 3.5 million EU nationals in the UK and the 1.2 million UK citizens living on the continent).
  • The exit bill to cover the UK’s outstanding EU commitments.
  • An Irish border.
  • Gibraltar.
Phase 2 December 2017 – March 2018 Negotiations to include:

  • Talks on future trade deals.
  • Transition arrangements until these are agreed some time in the future, almost certainly post March 2019.
24 September 2017 The German election: this is likely to impact on the scope and structure of the talks, especially if Angela Merkel does not retain power.
29 March 2019
  • Unless an extension of time is agreed by all EU Member States or there is a change in the UK’s policy on Brexit, the UK will leave the EU, whether or not a deal has been reached.
  • If no deal for trade is in place, it may mean that the UK’s trade relationships will follow the WTO model.
Post March 2019 There will likely be an implementation period before the new arrangements take effect.

We offer a Brexit contracts review and training session, please see further details on Our Clear Thinking Around Brexit brochure. You can find further information on Brexit and the impact upon your business at our dedicated web page: http://www.hfw.com/Brexit, alternatively please contact our Brexit Steering Group on brexit@hfw.com.

Nicola Gare

For more information, please contact the authors of this briefing: Brian Perrott, Partner, London, on +44 (0)20 7264 8184, or brian.perrott@hfw.com, or Anthony Woolich, Partner, London, on +44 (0)20 7264 8033, or anthony.woolich@hfw.com, or Nicola Gare, Professional Support Lawyer, London, on +44 (0)20 7264 8158, or nicola.gare@hfw.com.

 

 

Footnote

  1. Purdah is the period between the calling of a general election and the final result of the election, during which time the ruling party is prevented from acting on any initiative that may give them an advantage in the election.

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