Brexit – Implications and Consequences

Has the UK officially left the EU?

After the leave result of the Brexit referendum, UK’s exit process from the EU has now started though the UK is yet still a member of the EU as the referendum is not legally binding and therefore the EU acquis is still being enforced.

More than 2 million people urged and signed a petition for a new referendum as a result of the factors such as the resignation of the Prime Minister David Cameron, the Pound dropping to its lowest value within the last 30 years as well as the losses within the stock market. However statements were made later on stating that a second referendum will not be possible.

How the “Exit” procedure will occur within the scope of the EU legislation?

EU is governed by the Treaty on the Functioning of the EU and the Treaty on the EU. The Article 50 of the Treaty on the EU regulates the member states’ right to a withdrawal and the relevant procedure. Within the scope of the aforementioned article a two years period is set out which will be initiated by the notification on withdrawal by the UK. Within this period, the withdrawal agreement may be negotiated and signed by the Council on behalf of the Union acting by a qualified majority after obtaining the consent of the European Parliament.

The UK will withdraw from the EU unilaterally if no agreement is reached within these two years or no extension of time is granted unanimously by the European Council and the Treaties shall cease to apply to it. The UK as the withdrawing member state shall not participate in the discussions of the European Council or Council or in decisions concerning it.

David Cameron stated that the Article 50 will be triggered only after the exit model is determined. Therefore the exit calendar is not certain yet and it will become clearer in light of the future political developments. The EU officials underline that official negotiations shall begin only after the notification on withdrawal is made. Nonetheless the EU does not have a right to compel the withdrawing member state to make a notification.

On the other hand, there is no regulation under the Article 50 on whether the member state can revoke its notification on withdrawal or not.

What are the possible “Exit” models?

Although the Treaties do not shed a light on the legal outcomes of an exit, it is suggested that various models such as the EEA (Norway model), the Sweden, the Customs Union (Turkish model), the Canadian and the WTO membership may be implemented.

What are the effects of exit on the EU?

With the Article 50, in a way the EU has a right to govern the negotiations. As the UK will leave EU unilaterally if no agreement is reached within the two years period or for instance if the European Parliament does not give its consent to the Council.

The experts claim that the UK’s withdrawal from EU will disrupt the EU’s internal equilibrium and the Germany will increase its political and economic power due to declining of the weight of the non-euro members to %15 within the Union. Within this scope it is estimated that the exit will be a ground for other member states’ requests to hold a referendum and the rising right wing politics may benefit from this. This will undoubtedly may cause harm to the liberal political and economic order of the EU and  which was possessed until now.

What are the possible legal outcomes for the EU citizens living in ?

Approximately 3 million EU citizens live in the UK which constitute %6.6 of the total work force. At present and during the two years period starting from the notification on withdrawal the EU legislation will continue to be binding for the . Therefore within this period the EU citizens living and working in EU will continue to possess their rights of freedom of movement. Within this scope it is estimated that the permanent residency rights of the EU citizens that are living in the UK for five or more years will not be effected.

On the other hand, it is stated that during the two years negotiation period different regulations may be determined with respect to EU citizens. Therefore due to these regulations the EU citizens may be required to make applications to obtain permits for living or working in the UK which will be similar to the application of the citizens from a third country.

What are the possible outcomes for the UK economy?

The pound decreased to its lowest value of the last thirty years, a huge decrease in value occurred within the stock market and the credit institutions S&P and Fitch reduced the UK’s credit note to AA from AAA during the period after David Cameron’s resignation following the leave result under the referendum.

The political developments in the UK, EU and the world together with the withdrawal agreement that will be signed upon the negotiation process will be key factors with regards to the possible financial outcomes and their effects in the long terms. The economists underline that the current uncertainty which is prevalent at the moment is causing an unrest.

Will there be terminations and disputes under the contracts resulting from the exit?

It is suggested that the private-law contracts may be terminated by evaluating the exit or the legislation that will be implemented after the exit as a force-majeure, frustrating event or material adverse effect within the scope that will be permitted by the terms of the contract and therefore disputes may occur as a result.

What are the practice areas that could be effected mostly?

Especially regulated areas such as corporate, competition, data privacy, tax, aviation, IP law and clinical research are expected to be amended significantly following the exit.

Please feel free to reach us to understand the implications of Brexit as well as EU law to your businesses.


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