Abstract of machinery with blue tint.

Brexit - five key points all top GCs and in-house lawyers should consider

29 February 2016

So the date is set and David Cameron, George Osborne and Teresa May are fronting one team in the "Euro - vision song and dance competition" with Boris Johnson and Michael Gove leading the other one.

As rhetoric filled chants of "in" and "out" fill the air (a bit like the famous Hokey Cokey song and dance), the good in-house lawyer must remain calm and objective and look below the emotion to the substance of what is actually proposed.

To help you to do this I think that it is worth, as an in-house lawyer, reflecting briefly on five key points – which follow on from the comments that I made in my blog last July.

1. Lobbying: if your company wants to get involved in lobbying then there is a £10k threshold at which you must register your company and have someone within the company personally accountable for ensuring that your company complies with the reporting and other obligations involved. As the GC, you often end up being handed awkwardly shaped issues at the last minute; as now is the last minute and this obligation is awkwardly shaped, it's worth getting up to speed now and briefing your Board if there is any likelihood that your company or key individuals within it will want to join the referendum mêlée.

2. What has David Cameron actually achieved? There is already a lot of noise and hyperbole about what has and has not been achieved. If your Board or Management ask what has actually been achieved you need to be able to explain succinctly and neutrally – the BBC's James Lansdale has produced a concise summary.

3. What does "in" or "out" look like? For "in" please see James' article referred to above.

For "out" I refer you back to my earlier blog – no one knows. As with the Scottish referendum, a lot is already being "wishcast" (like a "forecast" but based only on hopes for desired outcomes rather than being a projection based on extrapolating existing knowledge) about outcomes that can or cannot be achieved. However if you go back to basics:

a. the Lisbon Treaty of 2009 established a mechanism for the exit of a state from the EU treaties (Article 50). However, the procedure outlined to be followed by the EU and the exiting country is very sketchy. The Article provides a default two year (potentially extendable) period to negotiate the exit. However, within this period it would be necessary to agree: the detailed mechanism agreeing exit arrangements; the exit/transitional arrangements themselves; and any desired form of longer term residual relationship. When you start to consider the necessary scope of these discussions, ranging from UK funding to the EU (and EU funds disbursements back), to what happens with the European Arrest Warrant and potential impacts on the Spanish border with Gibraltar then it becomes clear why two years – and potentially much more time – is likely to be needed;

b. a total disengagement (after transitional unwinding arrangements) would be unlikely and so some form of ongoing relationship would be needed with the EU for trade, travel, etc – not so much slamming the door as you leave, more leaving at least a foot jammed between the door and the frame to keep it partially open;

c. as a result an exit would be likely to involve prolonged negotiation – about both transitional and new long term arrangements – and the UK would not get all of what it would ideally like (there would inevitably be a price to pay to the other EU states involved to secure agreement both for some level of continued connections with the EU and for the mutually acceptable method of "structured disengagement" that both "sides" would need and, having committed to exit, we may not have the strongest of negotiating hands). It is perhaps worth reflecting on how long and how much effort it has taken Cameron to secure what he has secured when thinking about the scale of the task that this represents;

d. there are other treaties that are non-EU related that the UK is a party to internationally which impose domestic administrative and legislative burdens – it is unlikely that these would change and many, such as on anti-bribery, tax transparency, modern slavery, product safety, sanctions etc, are things that the UK wants and/or is actively promoting internationally at present. So, it is likely that at least some of what is upsetting "out" campaigners can actually be "root caused" to something that leaving the EU would not fix;

e. most "out" (and "in") campaign material is at the principled level (autonomy, state funds allocation, etc). There are few specific legislative change proposals yet identified by the "out" campaigners at the level of clarity and detail that you can make legislation from. But it is exactly that legislative change that is needed in order to make anything substantively different from what we have now happen. It is hard to draw a collectively satisfactory route without a clear, precise and consistently held destination in mind (how many sat nav systems have you seen with an "anywhere but here" button?) – hopefully more clarity will emerge on this in coming weeks to allow voters to have the opportunity, should they wish, to vote on substantive proposals; and

f. there is relatively limited capacity in parliament (in relation to the volume of law involved) to make substantial volumes of fresh "replacement for EU law" (assuming that a clear and consensual view emerges) on what changes are needed. This means that, unavoidably, much domestic statute and case law would remain very similar to existing EU-shaped law for a long time and then, possibly, start to diverge.

This leads to the conclusion…

…that any exit would, unavoidably, be messy, slow, distracting on domestic governance and civil service activity, unpredictable (because of the number of negotiating parties involved) and have long transition periods for disengaging and, in the meantime, much legislation would continue to look very similar to how it looks now.

This observation is factual. It is the "price of the activity to allow a change" rather than a comment on the "merits of making that change". It is not to make an argument for the "in" camp – which would itself have a fair few uncertainties around translating the commitments secured into reality going forwards. After all, what would a "…feasible burden reduction target [towards enhancing competitiveness] in key sectors, with commitments by EU institutions and Member States" actually look like in reality?

However, by the very nature of the "in" camp's needs versus the "out" camp's needs there would be likely to be less legislative change and for it to be more focused in contained areas of business activity if the "in" camp were to win.

4. UK legislative impact: Progress through the Conservative manifesto's legislative agenda that was mandated by their win last year may be slowed for some time by:

a. distractions of campaigning;

b. the influence of the SNP and Labour on UK-wide legislation (less so on EVEL – English Votes for English Laws – legislation due to the size of the Conservatives' EVEL majority);

c. if "out" wins then as "what next, how, by whom and in what order" would come to the top of the agenda and, because these would be very big questions, it is possible that there could be a substantial ongoing impact on the Government's currently planned legislative agenda and timetable; and

d. as indicated above a substantial amount of Ministerial and Civil Service capacity would probably need to be diverted for a prolonged period to deal with agreeing and then implementing the exit arrangements.

5. Scottish election – 5th May. The SNP is only one seat short of a majority in the Scottish Parliament – it would not take much of a shift to give them an outright majority. Nicola Sturgeon and Alec Salmond have already indicated that: dissatisfaction with the Scottish Devolution agreement; an "out" vote for the EU referendum; and interfering with Sottish Human Rights are factors that might be included in the SNP's 2016 election manifesto as triggers to mandate the SNP to call for a new referendum vote on Scottish Independence. So the release of this document is important to watch for.

Keeping in time with the dance

As ever with big decisions, many people vote with emotion and feeling without understanding the detail but, corporately, we have to work with facts and legislative consequences and as GCs there has rarely been a time when so much legal and regulatory ambiguity of such import is likely to affect your employer's three and five year forward business plans.

It is a great opportunity to show the value that you as a General Counsel (in its plain English as well as titular sense) can add to your Management and Board.

You will, of course, be calm, factual, constantly up to date and proactive in communicating strategically with your business about what is happening and its likely impact on your business' near future.

But, if you fail to keep up with the song and dance, then you and your employer may well stumble…