27-06-16

Brexit: Next steps and consequences for the EU

On 23 June 2016, with a majority of 51.9%, the United Kingdom voted to leave the EU.

From a legal perspective, there is no way to avoid the withdrawal process under Art. 50 TEU. Of initial importance is the timing of the British Government's notification to the European Council of its intention to leave. The notification will probably be given at the EU summit on 28 and 29 June 2016. Thereafter, the United Kingdom's withdrawal will be mandatory. With termination of its membership of the EU, the EU Treaties will no longer apply to the United Kingdom. In all likelihood, both a withdrawal treaty and a treaty on the future relationship between the United Kingdom and the EU - regarding matters such as access to the internal market and freedom of movement - will have to be negotiated. Ideally, these negotiations will be held in parallel so that they come into effect simultaneously. The two-year deadline for concluding negotiations on the exit treaty can only be extended by unanimous agreement. The United Kingdom is likely to have significant economic interest in keeping the negotiation period and the associated uncertainty to a minimum. This weakens its negotiating position.

The main impact of Brexit will be on the United Kingdom. Britons are unlikely to be able to shed the EU's much maligned legislation if they want to retain access to the internal market. Furthermore, it seems highly likely that they will also have to bow to future European regulatory conditions - which they will have played no part in designing - if they want to safeguard the importance of London as a financial centre. Only in the scenario of a free trade agreement with the EU is it likely that a restriction on the freedom of movement of workers will be possible. Free access to the EU internal market is, however, unlikely to be achievable by way of such a treaty.

For the EU, Brexit is more than just an embarrassment. If, in the forthcoming negotiations with the United Kingdom, the group of Member States seeking to weaken European Integra­tion manage to prevail, this will put the EU, in its existing form, in jeopardy. The first step in this direction would be a bilateral treaty between the EU and the United Kingdom without any requirement for British legislation to be consistently amended to comply with changing EU legislation, or one which restricts freedom of movement.

If the EU allows this to happen, other Member States might also decide to follow the same route and demand similar privileges. If this catches on, the EU will find it increasingly difficult to assert its authority.