As you well know, stormy clouds have recently swept across the European sky. The 23rd of June 2016 marked the Brexit referendum. Great Britain voted to leave the European Union (EU).
Upon hearing the news, several people expressed their shock and anger, which was quickly covered by the media, the social media, the Internet and on TV. As a result, the political, financial, economic and social implications of Great Britain’s exit from the EU started to unfold. All led to a bleak prognosis. The juridical implications soon followed.
It is provocative and risky to make predictions in terms of the juridical impact the Brexit will have on EU countries, but the uncertainty that has been going around shows that nobody really knows what will happen, when it will happen and how it will happen.
Why is this so? The EU does not really have any experience regarding the exit of member states. It is true that there is a legal text that sets the rules which could enable a member state “to leave” the EU, but, at the moment, - we do not know how the exit will actually take place.
However, until the exit, we would like to discuss what is happening at the moment and what might happen in the near future.
Nothing has changed so far. Many of you have already found out that the result of the referendum has a consultative role and that it does not need to take legal effect. Nevertheless, the vote might be considered undemocratic if the opinion of the majority were ignored.
In practice, the process of negotiating a Brexit will start when the British government will notify the Council of Europe of its intention to withdraw, on the basis of Article 50 which is part of the EU Treaty (TUE/EUT – code version). The process should be finalized after 2 years have passed, following the notification date, but the duration can be extended if the consent of all EU member states is reached. In a report which tackles the entire exit process, the British Government estimates that up to a decade or more would be needed for a full EU exit and for agreements between the UK and the EU to be in place.
Therefore, until the official exit (meaning that the UK will cease to be an EU member state), the British are still EU citizens, the EU laws are still enforced and the commercial relations between the UK and the EU follow (almost) as before the referendum.
The message conveyed so far is: “business as usual”.
Nevertheless, we must ask ourselves what the Brexit might trigger in terms of the legal aspects that govern the UK’s relation with the EU member states that are left. Foreign experts believe that the answer to this question relies on the negotiations regarding the exit and the future agreements between the UK and the EU. For example, a solution might be for the UK to be part of the European Economic Space (EES), as Norway is.
Irrespective of the shape and form the Brexit will take, one thing is clear: the rights and obligations of economic agents from various domains and industries will be influenced by this “divorce”.
In addition to the social and political problems: the status of British residents in other EU member states or the status of EU citizens in the UK, the status of EU students in the UK, the EU budget resolution etc., there would be practical difficulties in the commercial relations between EU states and the UK.
Below, we will highlight only some of the many legal consequences that we should consider. However, if you wish to get deeper into the subject matter and find more information about the implications of the Brexit on various fields (finances, taxes, employee rights and employer rights, competitors, stock markets, insurance, aviation, etc.), you can consult the material that I gathered to write this article, material which you can find in the annexed bibliography.
The EU regulations (which would still hold in the EU member states) would no longer be enforced in the UK. The EU regulations (adapted to the UK law) might still apply, but modifications might still be needed. The UK legal bodies would no longer have a subordinate relation to the EU Court of Justice.
There would be issues when establishing contracts. Given the economic relations between British and EU companies, aspects regarding the end of various contracts or who should take on the risk for possible legal change is yet to be decided (How can EU companies shelter themselves from the introduction of taxes, like Customs Duty, which apply to the goods which are exported by the UK in the EU?);
The status of EU students in the UK will also be problematic: if – in the “tradeoff” with the EU – the UK will not agree to the right of free movement, the students coming from EU countries (Romania, for example) will probably be subjected to immigration control regulations.
The status of personal and private data would trigger a storm, as the field is undergoing change as we speak at the level of the EU legislation. The new GDPR[^7] directive in the field is planned to come into force as of May 2018. If the Brexit takes place until then, the UK would not be coerced to obey the new rules and regulations. However, in that case, the UK should adopt similar, equivalent laws on its own, to enable the transfer of personal data between British companies and EU companies (by establishing adequate protection measures, as is required from any non-EU country working with the personal data of EU citizens). Because there are so many businesses which offer global services, based on the transfer of personal data, it is crucial for the British law to be similar to the EU law.
Either way, the new GDPR directive will apply to British companies which plan or intend to sell their products and services from the UK to EU citizens (on the basis of the new principle of outer or extra-territoriality) – irrespective of whether the UK will adopt the GDPR directive or not, as a result of the Brexit.
As far as the intellectual property is concerned, two major issues can be foreseen:
European design and European branding – Since the UK will no longer be part of the EU, the already registered European trademarks will no longer be protected in the UK. The owners may have to re-register trademarks separately, in the UK, if no other solution will be found in the meantime, a solution that can give them the possibility to use the priority of the already registered European trademarks. Moreover, an individual or a juridical body wanting to file the documentation in order to obtain a European trademark, will have to consider that the protection of that trademark within the UK territory would no longer be available in the European space. Trademark protection in the UK would require the process of registration at country level, in compliance with British legislation, and assistance from a trademark counselor in the UK. Even if, at present, there is a high degree of uniformity at the level of registering trademarks in the EU (therefore, in the UK), it is not completely out of the question – as a result of the actual Brexit – that the British trademark legislation will start to differ from the European one. The same applies to European design.
The Unified European Patent – Huge effort has been made, for several years now, to make a dream come true: the Unified European Patent (including the Unified Patent Court[^9]) meant to introduce a unitary approach of European patents. The UK was an enthusiast supporter of this project. The UK’s vote against the EU implies that the EU can no longer get involved in this project (which can very well continue without the UK’s support). The next Unified European Patents would no longer hold and would no longer be acknowledged by the UK, and the decisions of the Unified Patent Court would no longer apply to British patents.
In spite of the aspects mentioned above, the UK would remain a member state of European Patent Convention (which does not fall under EU legislation) – but this is a separate means of obtaining patents from the European Patent Office (EPO).
Solutions can and must be found. One solution could be for Great Britain to join the EU again.
What does Article 50 state?
1. Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements.
2. A Member State which decides to withdraw shall notify the European Council of its intention. In the light of the guidelines provided by the European Council, the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union. That agreement shall be negotiated in accordance with Article 218(3) of the Treaty on the Functioning of the European Union. It shall be concluded on behalf of the Union by the Council, acting by a qualified majority, after obtaining the consent of the European Parliament.
3. The Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification referred to in paragraph 2, unless the European Council, in agreement with the Member State concerned, unanimously decides to extend this period.
4. For the purposes of paragraphs 2 and 3, the member of the European Council or of the Council representing the withdrawing Member State shall not participate in the discussions of the European Council or Council or in decisions concerning it. A qualified majority shall be defined in accordance with Article 238(3)(b) of the Treaty on the Functioning of the European Union.
5. If a State which has withdrawn from the Union asks to rejoin, its request shall be subject to the procedure referred to in Article 49.”
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