Leaving the European Union and its Implications
By Rui Lopes
An Introduction to the European Union
The European Union (EU), founded on 1 November 1993, is a political and economic association of 28 member states within the European continent. At its core, the EU strives to provide a single market concept, attained through the standardisation of laws applicable to its member states which in turn sees the free movement of people, goods, services and capital throughout the Union.
However on 23 June 2016, history may be written as the EU may see its first ever divorce of one of its strongest member states as the British electorate head to the polls to vote on whether they should remain within the EU or not. It is without a doubt that leaving the EU would affect the United Kingdom (UK) not only on a national level but would also have far-reaching effects on an international scale including major implications on South Africa.
This article seeks to highlight some of the major effects, both economically and legally, on the UK deciding to leave the European Union.
Economically, a decision by the UK to leave the EU, without subsequently obtaining a free-trade agreement between the UK and the EU, would see the country’s Gross Domestic Product curbed due to its exports within the European Union becoming subject to trade tariffs and trade rules of the countries the United Kingdom now seeks to export to. Currently however, the UK’s exports to countries within the EU are free of any trade tariffs and the country need merely comply with the standardised trade laws imposed by the EU.
I propose however that if the UK were to opt out of the EU, the thought of subsequently entering into a free-trade agreement with the European Union would not be likely, especially considering the main reasoning for entering into the European Union in the first place, namely the creation of an internal single market concept. In not entering into such a free-trade agreement, the EU would be ensuring that other member states are discouraged from leaving the Union in future.
Furthermore a curbing of the UK’s Gross Domestic Product would see a direct impact on the country’s labour market, let alone the fact that many of the workers employed within the UK are not UK nationals, which could see higher rates of unemployment within the country. This is evident from the fact that the UK’s Gross Domestic Product is dependent on the EU by around 12%.
In conclusion, the culmination of these economic effects could very well see the UK slumping into a recession due to their inability to curb a 5% trade deficit currently plaguing the country.
But it’s Not All Bad for the Economy
If the UK were to opt out of the EU, they would potentially save around 13 billion Pounds per year, which is the country’s annual contribution fee to the EU. Furthermore leaving the EU would provide a vast amount of freedom to the UK in deciding its own trade deals, which in turn would allow it to revert back to what the country was best known for, trading with the world.
The UK would then trade under the rules of the World Trade Organisation, of which the country is a member. In doing so, such would allow the UK the ability to unilaterally lower trade barriers currently seen whilst it remains within the EU. Trade barriers are known as measures imposed to make imported goods or services less competitive than locally produced items.
However the next consideration becomes what the legal implications are for the UK if Thursday’s result would be to leave the EU?
The Legal Implications of Leaving the European Union
Thursday’s referendum would have far reaching legal implications on the UK. The first major legal implication that might be seen from the result is that the legislation giving effect to the referendum, namely the European Union Referendum Act, makes no provision for any automatic changes to occur upon the result of the referendum being to opt out of the EU. This would most likely lead to an instance where Parliament itself would be required to pass a motion in this regard before following the correct procedure of withdrawing from the EU. Therefore although it is submitted that there is a constitutional duty to give effect to the result of the referendum, there is nothing stipulated in the Act to this effect.
Once it has however been decided that the UK is determined on leaving the EU, the next step would be to follow the correct legal procedures in withdrawing from the Union. If the UK does not follow the correct procedure as laid out in the Lisbon Treaty, through merely repealing its domesticated law in terms of the European Communities Act of 1972, the UK will be in breach of international law as it would be unilaterally exiting from the EU. The legal effect of the UK violating international law is that such conduct would make it more difficult to enter into future trade agreements with countries within the EU and with the EU itself.
According to Article 50 of the Lisbon Treaty, which provides a mechanism for countries choosing to withdraw from the European Union coupled with the correct procedures to be followed, such an Article allows for country’s to withdraw from the EU on condition that such is done in accordance with the specified country’s constitutional requirements. This would in itself lead to much debate in relation to whether the country’s constitutional requirements have been met as the United Kingdom does not have a codified constitution, meaning that there would be much room to argue what the constitutional principles are in this instance.
Some of these principles would be included is the requirement of there being no disputes in relation to the referendum itself. If there are any disputes arising from the result of the referendum, these would need to be resolved by a court of law. The EU Referendum Act provides a 6 week period for lodging such complaints.It is submitted that this would most definitely be the situation if the result of the referendum is to leave the EU.
After the UK has however complied with its constitutional requirements in this regard, the next step to the withdrawal process, according to Article 50 of the Lisbon Treaty, would then be for the UK to notify the European Council of its intention to withdraw. According to Article 50(2) of the Lisbon Treaty, an agreement has to be concluded in relation to the arrangements of the UK’s withdrawal from the EU together with the country’s future relationship with the European Union. Such an agreement would be negotiated in terms of Article 218(3) of the Treaty on the Functioning of the European Union.
From the date of such an agreement being concluded and entering into force, or within 2 years from the date of notification of intention to withdraw if there is a failure to conclude an agreement, any such treaties that were applicable to the UK whilst under the EU would cease to apply the UK will cease to be a member of the EU. The two year period may be extended by the European Union Council in agreement with the UK.
The agreement would then however require domestication in order for it to be binding within the United Kingdom, which such a process would take lengthy amounts of time to complete.
What about Existing Legislation within the UK?
If the United Kingdom is to opt out of the European Union, such would require a repeal of the current European Communities Act. However such a repeal must not have the effect of the country violating public international law.
In this instance the repeal would violate international law if the effect of the Act’s repeal would be the denial of the direct effect of EU law prior to the UK withdrawing from the EU as international law requires that such a repeal not have any retrospective effects.
Effects on South Africa
In light of South Africa’s strong trade alliances with the United Kingdom, whose benefits are especially seen in the Economic Partnership Agreement between the two countries which has seen South Africa’s exports increased by R60 Billion, a decision of the United Kingdom to opt out of the EU could have a knock-on effect from the UK to South Africa.
This would especially be seen in the instance where the United Kingdom’s economic sees a slump whereby such would affect the import levels of the United Kingdom, meaning that South Africa’s exports to the United Kingdom would, in turn, most likely see a decline. This would negatively impact South Africa’s economic growth, which currently is something the country cannot afford.
In concluding, the British electorate need to be mindful of both the grave economic and legal effects that may be felt by the country if choosing to leave the European Union. This is in no way saying that there are no advantages that await the country if they do choose to do so. Rather the electorate needs to ensure that the decision to leave the European Union is not merely swayed by the benefits it poses in possibly reducing immigration within the country but that the electorate truly feel it is both economically and legally the best choice available for the country.
Disclaimer: All information contained herein does not constitute legal advice in any form or manner nor is it intended. All legal advice must be obtained or gained from a consultation with a qualified lawyer. The views and opinions expressed are those of the cited authors and not those of the publishers of iGazette. iGazette accepts no liability for any information which may be incorrect.
© Rui Lopes. All Rights Reserved.
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