Quick Primer on the Actual Brexit Process

The UK has voted to get out of the EU, so is the Brexit saga finally over? Well, as clichéd and corny as it may sound, the vote for a Brexit is just actually the beginning. So, what are the steps for an actual Brexit? And how long will it take? Read on to find out!

Article 50 of the Treaty on European Union

Article 50 of the Treaty on European Union (TEU), as amended by the Lisbon Treaty, provides the legal basis for any member state to get out of the EU, as well as the formal process of withdrawal.

Here are the provisions of Article 50 in full (feel free to skip it):

  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 If a State which has withdrawn from the Union asks to rejoin, its request shall be subject to the procedure referred to in Article 49.

Let’s break it down into 3 easy-to-understand steps that even 10-year old kids can understand (or pretend to at least), shall we?

Step 1: Invoke Article 50 of the TEU

Paragraph 2 of Article 50 of the TEU states that “A Member State which decides to withdraw shall notify the European Council of its intention,” so a formal invocation of Article 50 of the TEU is clearly required. The Brexit referendum is not considered a formal invocation, however, and is therefore not legally binding on the EU.

This is made abundantly clear when European Parliament President Martin Schulz, European Council President Donald Tusk, Dutch Prime Minister Mark Rutte, and EU Commission President Jean-Claude Juncker issued a joint statement after the Brexit vote became official.

In the said statement, the EU heavy weights said that:

“We now expect the United Kingdom government to give effect to this decision of the British people as soon as possible, however painful that process may be.”

The joint statement also has the following bits (emphasis mine):

“We stand ready to launch negotiations swiftly with the United Kingdom regarding the terms and conditions of its withdrawal from the European Union. Until this process of negotiations is over, the United Kingdom remains a member of the European Union, with all the rights and obligations that derive from this. According to the Treaties which the United Kingdom has ratified, EU law continues to apply to the full to and in the United Kingdom until it is no longer a Member.”

If you didn’t quite get that, the top dogs of the EU are clarifying that until and unless there’s a formal invocation of Article 50 of the TEU, the UK is still considered part of the EU, which means that all of its trade deals are still in effect. In essence, nothing has really changed and everything is still fundamentally the same.

So when will the UK invoke Article 50 of the TEU? Well, that’s the UK Prime Minister’s job. And Cameron made it very clear in his “I’m quitting” speech that he won’t be the one to do it, saying that:

“A negotiation with the European Union will need to begin under a new Prime Minister, and I think it is right that this new Prime Minister takes the decision about when to trigger Article 50 and start the formal and legal process of leaving the EU.”

As to when a new PM will be elected, Cameron promised that there will be one by the time he steps down during the Conservative Party’s October conference. And the weird election rules in the UK would mean that the new PM would be another Conservative Party member, with Pro-Brexit Boris Johnson currently the one favored to succeed.

So if Boris, or whoever is elected as the new PM in October, immediately invokes Article 50 of the TEU, what happens next? Well, we go to…

Step 2: Negotiations

Once the new PM formally initiates the withdrawal process, the UK has two years to negotiate its relationship with the other EU members. This two-year time limit is renewable, however, provided that the UK requests it and the European Council unanimously votes for an extension. During all this time, the UK is still considered a member of the EU and all trade deals and other relationships with the EU are still in effect.

I just want to point out at this, er, point (I’m running out of words!) that the UK is a net importer relative to the EU. In other words, the UK exports less than it imports from the EU, which means that the EU actually benefits from trade with the UK!  So earlier threats about EU member states imposing heavy tariffs on UK goods would also hurt the EU, especially if the UK retaliates by imposing tariffs of its own on EU goods.

Of course, there’s nothing stopping the EU from imposing tariffs on the UK, especially if the EU sees it as a way to deter other aspiring “leavers,” given that political groups from other EU members have also began to clamor for an exit of their own.

Getting back on topic, we get two scenarios from here:

If negotiations fail and the two-year time limit expires, but the UK doesn’t ask for an extension, or EU members refuse to extend the deadline, then Brexit becomes a legal and actual reality. This is the bad ending, however, because the UK and the EU will be parting in bad terms, like when your ex-wife also takes your dog in a divorce settlement or when your ex-boyfriend leaves you for somebody else while taking your first anniversary token with him. Well, that’s kinda going overboard, but I hope you get the picture.

Also, the UK gets the following achievements at least:

Brexit Achieved!

Higher Difficulty Achieved!

But if negotiations are successful, we move on to…

Step 3: Ratification and Brexit Proper

Once negotiations are done, a deal will be drafted for approval. And for the deal to be approved, the votes of at least 20 EU members who comprise at least 65% of the population are needed. After that, the agreement for UK withdrawal must be ratified by the European Parliament, as well as the UK parliament.

The UK parliament will then have to repeal the 1972 European Communities Act, which is the legislation that made the UK part of the EU, then know as the European Economic Community. Only then is Brexit a legal and actual reality.

The UK then gets the following achievements:

Brexit Achieved!

Trade Deals Achieved!

And no, Greenland’s exit from the EU doesn’t count, since Greenland is part of the Danish Realm. It’s not an independent country, and Denmark is still a part of the EU last time I checked.

Summary

Too long, didn’t read? Well, you hurt my feelings, just so you know. Anyhow, here are all the main points that you need to remember in the days to come.

  • Brexit is not automatic
  • Formal invocation of Article 50 of the Treaty on European Union is required
  • Brexit referendum is not a formal invocation of Article 50
  • PM will invoke Article 50
  • Cameron won’t do so, passing the baton to the next PM
  • Next PM will be voted in by October when Cameron steps down
  • Earliest formal notice for UK withdrawal would therefore also be in October
  • Once Article 50 is invoked, the UK has 2 years to negotiate with the EU
  • EU trade deals and EU-related laws are still in effect and UK is still part of EU during all this time
  • 2-year time limit is renewable
  • If negotiations fail and 2-year time limit is not renewed, UK gets the bad ending and it’s game over, but at least Brexit is a reality
  • If negotiations succeed, lots of legal stuff happens (read the rest of the write-up, if you want the details) before the UK gets the (relatively) good ending, making Brexit a reality
  • Once UK leaves the EU, Achievement Unlocked: First Country to Leave the EU
  • And no, Greenland’s exit from the EU doesn’t count, since it’s part of the Danish Realm, not an independent country

So, now that you know that a Brexit is not automatic and must go through a process that will take months (or years), and that trade agreements and other EU-related deals and laws in the UK are still in place and will continue to be in place until an actual Brexit occurs, wanna share your trading bias on the pound?

 



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