On 23 June 2016, the UK will hold a referendum in which the British people will vote on whether the UK should remain part of the European Union or leave. This important decision will be determined by a simple majority of votes cast. The result of the referendum is likely to emerge during the early hours of 24 June. At the moment, it’s “neck and neck” and the opinion polls change daily. McGuireWoods is not taking any position for or against BREXIT. However, we want our clients to know that we’re on standby to assist and to answer any questions that you may have. Below is a short summary of potential consequences if the UK were to vote to exit the EU (colloquially termed “BREXIT”).
Who would BREXIT affect?
- Any business or financial institution based in, with a subsidiary in, trading in or with any presence in the UK
- Any business or financial institution trading with the UK
- Any business or financial institution investing in the UK
What would be the likely effects of a vote for BREXIT?
It’s impossible to predict the timing and scope of legal changes that would result from a decision to exit the EU. There are various possible models for the UK’s relationship with the EU if there were a vote to leave, but there is no precedent and everything would be up for negotiation.
It is likely that a number of areas would be impacted by a vote to leave the EU including, but not limited to, Banking & Finance, Corporate & Commercial, Data Privacy & Security, Employment Law, European Competition Law and Litigation, which affected organisations should be considering in the event of a leave vote. McGuireWoods will monitor developments closely and will keep you fully informed and updated as any BREXIT process unfolds.
When would we expect to see any change in the event of a vote for BREXIT?
If the UK votes to leave the EU, although there is likely to be initial volatility in the global FX, debt and equity markets, for the time being, it would be business as usual. The UK will still be a member of the EU and no legal change arises immediately on the outcome of the referendum. However, clearly businesses (inside and outside the UK) would need to prepare for the new reality of a UK outside the EU. A period of uncertainty would exist as the process of exiting the EU unfolds.
Broadly speaking, there would be three stages to BREXIT:
- Negotiations on the EU/UK withdrawal agreement
- Negotiations on future arrangements between the UK and the EU
- Negotiations on trade deals between the UK and countries outside of the EU
There would be a minimum two-year period during which an EU/UK withdrawal agreement would be negotiated (though the UK government has suggested it could take at least 10 years to finish all three stages of the process). This period would commence with the service of a withdrawal notice by the UK to the European Council. Although the referendum result is not legally binding on the UK government, it is likely that the UK government would serve the withdrawal notice within weeks of a vote to leave. The two-year negotiating period can be extended, but any such extension would require the unanimous consent of the remaining 27 members of the EU, meaning that in practice it is unlikely that an extension will be achievable.
During the negotiation period, the UK would remain a member of the EU and EU laws would continue to apply to the UK. The UK would continue to participate in EU business, voting and meetings as normal. Without an extension, if after two years no withdrawal agreement is reached (which could be because the UK Parliament ultimately rejects it) or the UK is not able to accept the deal that is offered, exit would take place automatically. This would leave a large number of important questions unresolved.