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It’s Time to Talk About Brexit: An Introduction

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About The Author

Matt Bogdan (Former EU & International Law Editor)

Matt graduated with an LLB (2:1) from Durham University in July 2014. Most recently, he has been assisting with research on comparative company law at the Durham Law School. Matt is primarily interested in the TMT sector, but has also been involved in matters of public international law through Durham United Nations Society.

This article is part of the 'Brexit' series, edited by Matt Bogdan.

With the upcoming referendum on the UK's membership of the European Union, the Brexit series intends to explore key issues surrounding Brexit, particularly what effect EU law currently has on the UK, and what would be left with it gone.

Other articles from this series are listed at the end of this article.

Following what proved to be a rather eventful general election, it is time for the British public to focus on what will most likely become the headline-hitting debate for years to come. The talk here is obviously about the forthcoming UK referendum on its membership in the European Union (EU). Or perhaps we should already go ahead and pluralise it to ‘referendums’, given the declarations of some Tory Eurosceptics that a second referendum on the same topic should follow as early as in 2020 in case the first one results in the UK staying in a ‘seriously flawed EU’. Whether one gives credibility to such statements or not, it is clear that the notion of Britain leaving the EU (dubbed rather awkwardly as ‘Brexit’) has now become a real possibility with the Tories commanding an overall majority in the UK Parliament.

Given the deep level of economic, legal, cultural and political integration that the UK shares with the EU, it is beyond doubt that a Brexit will have far-reaching and multifaceted implications for Britain, which all need to be considered by voters before heading to the polling stations. Rather unfortunately, with the influence of the likes of UKIP and the Murdoch press, the current debate surrounding the EU appears to be overly preoccupied with the issue immigration, which albeit important, is certainly neither the only nor the single most important feature associated with membership in the EU. Thus, in an attempt to provide our readers with a broader, legally focused perspective on Brexit, over the course of 2015 we will be publishing a series of articles on the potential impact of an EU exit on the UK law, legal practice and business.

This article, which serves as a functional introduction into the Brexit debate for future articles in this series, will outline the historical development of the UK-EU relationship, explain how the notion of an in-out EU referendum came about and consider the stakes involved in a decision to leave the EU.

A Historical Perspective – UK’s Union Path

While concrete references to the notion of a ‘European union’ date back to the 19th century, notably including Henri de Saint-Simon’s 1814 pamphlet entitled ‘Plan for the Reorganisation of the European Society’ (where the Frenchman advocated the creation of a European Parliament in charge of the Union’s common interests), it can be said that the European nations have only started seriously considering the idea after the shock therapy of the two World Wars. The desperate need to maintain peace and security on the continent, compounded by the increasing economic competition from the US and Asia, and the fear over Germany’s rapid post-WWII industrial growth have encouraged the creation of a common European market in coal and steel (‘the European Coal and Steel Community’ (ECSC)) in the 1951 Treaty of Paris, which created a foundation for what we currently know as the European Union.

Despite Winston Churchill calling for a ‘United States of Europe’ in his 1946 Zurich speech, the UK remained sceptical of the ECSC and only in 1973 made the decision to join the European Economic Community (EEC), an ECSC’s successor. The British reluctance to join in with the founding Member States (Italy, France, Germany and the Benelux countries) may be attributed to a number of factors: the UK opposed the idea of having a ‘High Authority’ (an executive body supervising the ECSC) and the remit of its powers; with the WWII fighting taking place mostly on the mainland and the UK avoiding any major invasions or occupation, the country suffered relatively limited losses, thus making it less desperate for stability arrangements; reminiscent of its British Empire status, the UK also considered itself as somewhat superior to its mainland neighbours, making the prospect of joining the ECSC less appealing.

Nonetheless, in 1960s the Conservative Government, discontent with UK’s isolation and economic decline, and disillusioned by the less effective alternatives to the EEC, such as the European Free Trade Association, decided to apply to join the European Economic Community. Despite initially being hampered by vetoes over its admission coming from the Euro-and-Anglosceptic French President Charles de Gaulle, Britain managed to join the EEC in 1973.

Paradoxically, only two years later Britain already thought of leaving. The gradual political integration of the European Community proved too much for the then-Eurosceptic Labour Government and in 1975 the first British referendum on its membership in the Community took place. The British public voted with a 2/3 majority in favour of remaining in the EEC, quoting military defence, the UK’s position and relevance in the international community as well as ‘the future of their children’ as the key reasons for the decision. Since then, the UK’s pro and anti-European sentiments fluctuated with the country’s traditional political swings between Labour and Conservative government tenures, but never, until now, got to the point of risking the UK’s membership again. Interestingly, the reasons for the 1975 referendum and the forthcoming one are quite similar – Britain is wary of surrendering its sovereign powers to extra-national bodies such as the EU. This leads us to the essential consideration of how the EU’s competences evolved since the early days of the ECSC and whether the British concern over the current state of EU powers is justified.

A Historical Perspective – EU Competences

The systemic expansion of centralised powers in Europe came mostly in short bursts, through major European treaties and some hallmark European case law. Initially, the High Authority, which was an executive body set to supervise the ECSC and an ancestor of the European Commission, had considerable powers but these were limited only to determinations of conditions of production and prices for coal and steel within the Member States.

Six years following the founding Treaty of Paris, the 1957 Treaty of Rome significantly expanded the European bureaucratic element by adding four new institutions – the European Commission, the Assembly (future European Parliament), the Council and the European Court of Justice. These gained competences over some of the new common policy areas, including competition, commercial, agricultural and transport policies. The Treaty of Rome also set up a customs union across the Member States, which incorporated the European ‘four freedoms’ – freedom of movement of goods, workers, services and capital.

For our purposes of identifying only the most drastic increases in centralised European governance, the next 30 years of the EEC’s history are largely inconsequential, expect for what is probably the single most important case ever delivered by the European Courts, namely the Van Gend en Loos ruling from 1963. The case expressly established the EEC as a supranational organisation that essentially rules over its Member States: ‘the Community constitutes a new legal order of international law for the benefit of which the States have limited their sovereign rights, albeit within limited fields’. Further, it also recognised private parties as proper EU law subjects, thus acknowledging that the EEC agreement binds not only governments, but also the people of Europe directly.

The period between 1990s and 2007 was marked by three substantial EU treaties: Maastricht Treaty (1991), Amsterdam Treaty (1997) and Treaty of Nice (2001), which all furthered the European Union’s scope of competences. Cumulatively, the treaties granted the EU express competences in a number of fields, such as visas for non-EU nationals, education, culture, public health, consumer protection, energy and telecommunications. Notably, the EU’s attempt at seizing competences in the field of social policy was strongly opposed by the UK, which initially secured an option to opt-out from the ‘social chapter’, but later, upon a change in the government, decided to forgo that option and accept the common social policies.

Finally, the European Union as we know it nowadays was formed by the 2009 Lisbon Treaty. Apart from expanding the bureaucratic element of the Union, the EU was granted further competences in areas such as intellectual property, humanitarian aid, sport and climate change. The UK, building on its already existing opt-out from the European policies on asylum, visas and immigration, has secured a more general option to opt in or out of any common policies in the field of justice and home affairs.

The overview above is merely a brief summary of the key changes in the EU competences, as introduced since the EU’s foundation. A more thorough account may be found in Damian Chalmers, Gareth Davies and Giorgio Monti’s ‘European Union Law’ textbook.

Current State of EU Competences

It is therefore quite evident that over the past 64 years of its existence, the EU has acquired competences in a very broad range of areas, allowing it to legislate for the Member States and affect certain national affairs. The Treaty of the Functioning of the European Union (TFEU) distinguishes between three types of competences: exclusive (where the EU can act on its own), shared (where both the EU and individual Member States can act) and supporting (where the EU merely assists). Notably, the latter two are governed by the principle of subsidiarity (established by the 1991 Maastricht Treaty), according to which the EU will refrain from acting unless it is more effective than an action taken on a national level.

While an in-depth article on the current balance of powers between the EU and its Member States will feature in this article series, it is nonetheless worth noting that in 2014 the UK government has finalised its 2 year-long substantial review of how competences are balanced between it and the EU (a full, 3.000 page report is available for your enjoyment on the government website). The report proved to be a mixed bag of tales about excessive intrusiveness and supranationality, and about pro-EU legislative harmony benefitting the UK. Overall, however, in his book ‘Britain’s Future in Europe’, Michael Emerson of the Centre for European Policy Studies argued that the balance between the EU and UK competences is adequate, with the EU refraining from abusing the powers it in theory has. This shows, probably to the dismay of many Eurosceptics, that there is indeed room for debate on the EU-UK balance of powers and given the opt-outs already secured by the UK in the past, an outright condemnation of the EU cannot be accepted by anyone looking to cast an informed vote in the incoming referendum.

EU Referendum 101

In 2013, David Cameron pledged in his Bloomberg Speech to give the British public an in/out referendum on the UK’s membership in the EU by 2017, providing that his party wins the general election in 2015. He also reserved the right to negotiate a ‘better deal’ with Brussels before holding the referendum, which mostly referred to addressing the issues surrounding immigration (benefits tourism and mass immigration from new Member States). The response to this speech from other European Member States, including Germany and France, was largely sceptical and Mr Cameron was warned of trying to cherry pick the beneficial aspects of the EU without accepting the requisite responsibilities.

Many attributed Mr Cameron’s pledge to his attempt at pacifying the growingly Eurosceptic members of his party and prevent the rapid growth of UKIP, an anti-EU nationalistic party, before the 2015 general election. However, now that the Tories have an overall majority in the Parliament, the issue of the EU referendum has been marked as a ‘top priority’ in the Queen’s Speech of 2015 and Mr Cameron went on a diplomatic trip across continental Europe’s key capitals, meeting the Dutch prime minister Mark Rutte, German Chancellor Angela Merkel, Polish prime minister Ewa Kopacz and the French President Francois Hollande to discuss ‘flexible solutions’ to the current issues with the EU.

Interestingly, while the leaders of Europe have generally been more welcoming to Mr Cameron’s insistence on reforming the UK’s agreement with the EU, any fundamental changes to the EU Treaties have largely been ruled out, with Prime Minister Kopacz specifically rejecting the possibility of the UK denying benefits to its Polish residents. This is crucial as any EU Treaty changes may only be effected with the approval of all 28 Member States, which means that any attempts at discriminating against migrants from Eastern Europe will be automatically prevented by Member States from that region.

This puts Mr Cameron in a politically impossible situation given that the Eurosceptic Tory backbenchers are likely to be pressing on the prime minister to adopt a hardline approach in his negotiations with the EU. Indeed, just this week some 50 Eurosceptic Tory backbenchers have already accused Mr Cameron of ‘rigging’ the EU referendum rules in favour of a ‘yes’ vote, which is only a sign of political conflicts to come, particularly if Mr Cameron returns from Brussels empty-handed. Meanwhile, both Germany and France have declared that they will not be willing to consider any reforms of the EU before the end of 2016. Further, both the French President and the German Chancellor will be facing their own national elections in 2017, which makes it even less likely for them to be open to any major and controversial changes in the EU status quo. This makes the ‘renegotiation’ part of Mr Cameron’s referendum plan rather unpromising, which significantly increases the likelihood of the British public voting against the UK’s membership in the EU and makes the possibility of major breakup within the Tory ranks ever more serious.

The referendum on leaving the EU will be the first of its kind (except for the indirect predecessor in the form of the 1975 referendum, mentioned above) and also the first time the public has ever been consulted on membership of a major international organisation. The current polls indicate a raise in pro-EU sentiment among the British public, with between 40% and 50% voting in favour of staying in the EU. We need not however look far back to see that the reliability of polls in the UK is far from accurate – the general election predictions speak for themselves. There also exists an improbability factor that is innate to referendums – Natalie Nougayrede points out the example of France, which 10 years ago rejected a proposal to ratify the Treaty Establishing a Constitution for Europe with a resounding 55% in favour of ‘no’, despite the pre-referendum polls expecting a 65% vote in favour of ‘yes’.

The Stakes

The high level of integration between the EU and the UK means that a potential Brexit would impact the British society on many different levels. In the event of a ‘no’ vote, Mr Cameron will again have to strike a ‘deal’ with the European leaders that will determine the UK’s future in the international community. Some possible options include joining the European Free Trade Association (EFTA) and the European Economic Area (EEA), entering into a brand-new free trade agreement with the rest of the EU or even severing all ties to the EU. At the moment, it is unfeasible to gauge the most likely turn of events because of the multitude of factors involved, however some fields particularly at risk from Brexit are briefly outlined below.

The UK Legal System

Estimates show that EU law currently accounts for around 2/3 of UK law, with EU legislation flowing into the UK legal system both by directly effective EU laws and by domestic implementations of EU Directives. Brexit could therefore leave the UK with huge gaps in its legislative framework - something that can be both good and bad depending on which area of law is being considered. The areas where the EU has exclusive competences, such as competition law, will likely see most disruption, whereas others may experience less turmoil. For a detailed, area-by-area breakdown, please look out for future articles in this series.

The Legal Sector

The UK legal services market is the biggest in Europe and accounts for 7% of the global industry, however without access to the European internal market, it may start losing its renown. Without a good ‘post-exit’ deal with the EU, British lawyers abroad may find their access to national courts and practice of local law somewhat restricted.

Trade & Business

Membership in the EU gives the UK access to a huge internal market with which the UK does half of its trading – depending on what kind of trade agreement, if any, the UK is able to negotiate after leaving the EU, the consequences of Brexit may vary from severe to acceptable. The UK services sector, which accounts for over 70% of the country’s economy and constitutes a large share of UK exports, is particularly prone to disruption. In fact, some business leaders have already called for an earlier referendum because the current uncertainty surrounding the future of the UK in the EU hurts investment.

Position in the International Community

Another consequence of leaving a large organisation such as the European Union is that it will affect the UK’s position on the international arena. With businesses considering to relocate their headquarters to other Member States, the City of London may start to gradually lose its prestigious position at the pinnacle of the global financial system. Furthermore, Nicola Sturgeon, Scotland’s first minister expressed her concern over Scotland being inadvertently ‘pulled out’ of the EU because of a UK-wide ‘no’ vote and warned of a potential triggering of another Scottish referendum. While improbable to happen, this could potentially result in the UK being isolated both from the EU and Scotland at the same time, a prospect that should worry even the most resolute Eurosceptics.

Conclusion – Merely a Beginning

With the basics of Brexit covered above, future articles in this series will focus in greater detail on the impact of Brexit on particular areas of UK law and business, and on the British legal profession as a whole. Please watch this space for new content.

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Tagged: Brexit, European Union

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