After the Supreme Court’s split decision (8-3) that Parliament must vote on the triggering of Article 50, the next key challenge for the Government involving Brexit will be the High Court challenge regarding Article 127 of the Agreement on the European Economic Area (EEA) and our position in the EEA. This challenge incorporates the idea of a hard vs soft Brexit.
The terms ‘hard’ and ‘soft’ Brexit are not strictly defined and relate to the UK’s relationship with EU post-Brexit.
A hard Brexit sets itself out to be just that, a hard and difficult negotiation process to try and ensure that the UK gets what it wants. However, due to no other member state leaving before us, we do not know exactly what we do and do not need. This creates difficulties not only for the UK but for the EU negotiators as well as this is unchartered territory.
The notion of a hard Brexit will likely involve the UK standing its ground and refusing to compromise on issues such as the free movement of people and the UK’s departure from the Single Market in order to trade on our own negotiated terms. This means that there would be an introduction of trade restrictions and tariffs on the movement of goods into, and from, the EU.
A serious and lengthy negotiation process will have to occur in relation to the provision of services as no other country with agreements with the EU have any such agreements in place.
The UK has a service dominated economy and such agreements will likely be a major focus for the UK during the negotiation process. Although it remains to be seen whether this will be the case, big businesses, including banks and other financial service providers, have already sent out stark warnings of relocations and the moving of head offices to outside of the UK, back into the EU, should we leave the Single Market. Such a loss to industry would be a major blow as the UK’s economy.
A soft Brexit, however, relates to the UK remaining within the Single Market to a certain extent allowing for the continuation of our trade links without as much disruption. The UK’s relationship in the EEA is one that would allow us to remain within the Single Market with the caveat of allowing a degree of free movement.
As a result of Theresa May’s speech, the UK’s stance, moving forward, is that of a hard Brexit as the UK will exit the Single Market. Despite the strong stance taken, it remains to be seen how the negotiations will progress given broader global developments.
However further issues have been raised in regards to our position in the EEA, as set out below.
As set out in our earlier more detailed Brexit article, there is a debate as to whether the UK is a member of the EEA only through our membership of the EU or whether the UK is a member of the EEA in its own right as a result of its membership in the EU. If we are not a separate member of the EEA, due to our split from the EU, we would also need to leave the EEA as an EU member and then apply to re-join separately. This will likely take further time, resources and negotiations that will further delay the end of Brexit.
There is an additional issue even if we are deemed to be a separate member of the EEA. The EEA Agreement states that it is limited to areas in which the EU Treaties apply plus Norway, Iceland and Liechtenstein. This means that the UK would be a member of the EEA when the territorial ambit of the EEA does not cover the UK. This area will therefore have to be negotiated carefully to ensure that there is no time where the UK is left uncovered and unprotected in regards to the relevant agreements.
There is currently a High Court challenge in relation to Article 127 brought by the pro-EU group British Influence through the chairman, Peter Wilding, and Adrian Yalland, a Conservative lobbyist who voted to leave the EU. It is due to begin on 3 February 2017.
The UK government’s current position is that we are merely a signatory to the EEA agreement due to our position as an EU member. The challenge however states that we will remain a member of the EEA despite our exit from the EU and that should we not wish to remain a member of the EEA, we would have to invoke a separate mechanism.
Under Article 127 of the Agreement on the EEA, in order for a member of the EEA to leave, the member state must give 12 months’ notice to all of the EEA states including Norway, Lichtenstein and Iceland.
If the challenge to the High Court is successful, it will be a very interesting decision as the Government does not have a mandate from the referendum to give any such notice to the EEA member states.