Brexit: article 50, how does it really work?

In the wake of the Brexit referendum the newest buzzword in the media was ‘article 50’. Some – both in and beyond the UK – say that the process must be quickly launched, while others argue that there is no rush. So how does the process really work, and what are the consequences for the UK and the EU? We provide an overview.

Prior to the implementation of the amendments introduced by the Treaty of Lisbon, EU law did not provide for the exit of a member state. This did not mean that an exit was impossible, just that it was extraordinarily complex. But because we now have an exit clause in the form of article 50, this does not require further examination.

The Treaty of Lisbon provides for an exit clause for member states that wish to withdraw from the EU. The principle of this (new) article 50 is that member states can decide to withdraw from the EU, in accordance with their constitutional requirements (paragraph 1). If this decision is made (by means of a parliamentary vote), then it must inform the European Council thereof.

Next, exit negotiations start, during which the manner in which both parties (the UK and the EU) consider their future relationship must also be taken into account. It is obvious that this is a massive task that will have extensive consequence for both parties (see below). It has been claimed in the media that the UK wants 750 additional negotiators, whether or not from the private sector, in order to negotiate the withdrawal. If the UK and the EU cannot reach an amicable settlement, then one is made by the European Council on behalf of the EU, after being approved by the European Parliament (paragraph 2).

Of course this will have far-reaching effects. Technically, any treaties (and all resultant texts) will no longer apply to the UK as of the date upon which its withdrawal takes effect or after two years after the notification of intent, as set out above. This two-year period can be extended, but only with the consent of the UK and if the Council unanimously agrees to it (paragraph 3). But the consequences for the EU must not be underestimated either – the UK will no longer play a role in EU policy, a number of important posts will have to be filled and officials will have to be replaced. And then there is also the budgetary impact. For the EU’s total 2014-2020 budget of €960 billion, a net contribution by the UK of £65.7 billion was provided for, £47.5 billion of which was devoted to the 2016-2020 period when the UK may have already withdrawn from the Union (source: FT). So how can (or must) this budgetary hole be filled by the post-UK EU? It may turn out to be a silver lining that the UK is not a part of the EMU/Eurozone.

For the sake of completeness, the text of article 50 includes the principle that if a member state that has withdrawn reapplies for membership, it will have to follow the standard process for accession and will thus have to go to the back of the queue (paragraph 5). We must now wait and see when – and indeed, whether – the UK will provide the aforementioned notification that will launch the formal withdrawal process. The new prime minister, Theresa May, appears to be determined to start the ball rolling and ‘will make a success of it’. Meanwhile the British pound has plummeted to its lowest levels since 1985, the UK property market is looking shaky, the financial markets are still in turmoil and there is a fear that Brexit will trigger a fresh financial crisis.

We will continue to keep you updated on Brexit, but if you have any questions, please don’t hesitate to email them to brexit@moorestephens.be.

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