British Prime Minister David Cameron spoke on Thursday during the unveiling of a ‘Britain Better...

For UK and EU, Breaking Up Is Legally Hard to Do – Wall Street Journal

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British Prime Minister David Cameron spoke on Thursday during the unveiling of a ‘Britain Better in Europe’ poster at a Caterpillar engine factory in Peterborough.

What happens on the morning of June 24, if the British vote the day before to leave the European Union?

Some of those advocating exit say the morning after the referendum will be nothing special. “There will be absolutely no perceptible change. Life will go on as before,” says the Leave EU website. Indeed, no legal change occurs until the U.K. formally withdraws from the bloc, and that won’t be instantaneous. Yet, in many ways, things will change rapidly.

The central banks of the U.K. and the eurozone will be braced for any turmoil in the financial markets, as Europe faces a new geopolitical uncertainty. Politically, the British government will likely be in tumult as Prime Minister David Cameron, waking up after his failure to persuade the British people to remain in the EU, comes under pressure to resign, both from inside and outside his party.

The government’s relations with other EU states will immediately shift. Its ministers and diplomats will still sit in EU meetings discussing new laws and other initiatives. But the U.K.’s views will have little weight, given its impending exit, and the U.K.’s interest will be minimal.

The government will also be faced with a critical technical decision: How to leave. There are no precedents for doing this and contingency planning has been forbidden both in London and Brussels. On this point, as on others, there is no agreement among the Leave campaigners.

Leave EU, which describes itself as a grass-roots group, says it will be “business as usual” until the government triggers Article 50 of the EU treaty, which foresees two years of negotiations before formal withdrawal. This, says the group, “contains the necessary provisions for the U.K. to leave the EU on friendly and mutually beneficial terms.”

The official Vote Leave campaign isn’t so sure. “We do not necessarily have to use Article 50—we may agree with the EU another path that is in both our interests,” its website says. It adds that a priority will be to repeal the British legislation on which EU membership is based.

Along with many EU lawyers, Mr. Cameron has argued the only way to negotiate exit from the EU is Article 50. He said he would immediate trigger the clause because “the British people would rightly expect that to start straight away.”

But Article 50 is very tricky for the U.K. to maneuver. Once triggered, there is no “reverse gear,” and two years is a very short time to renegotiate 80,000 pages of EU agreements. The period can be extended, but only if all 28 EU countries agree. The risk for the U.K. is that, after two years, it would leave having failed to reach any agreement governing its post-exit ties with the bloc, creating huge uncertainty.

U.K. negotiators therefore face a cliff edge after two years, and subsequent cliff edges if the period is extended. True, both sides probably would want a deal, but the U.K. would likely want it more, not least because some other governments would want to discourage other prospective quitters. Article 50 was designed, after all, to put more cards in the hands of the rest of the EU than in those of the member wanting out.

Are there alternatives that put London in a better place? One proposal is to not trigger Article 50 immediately but delay. That would allow both sides to get their negotiating ducks in a row. It would also allow the U.K. time to have a political debate about what it wanted from the negotiations. But delaying doesn’t get around the cliff edges.

Agata Gostynska-Jakubowska of the pro-EU Centre for European Reform says delaying for too long also “might be unacceptable for the EU partners,” further eroding goodwill. The U.K., by extending the agony, would be an unwanted participant in EU meetings. Meanwhile at home, the political pressure would mount from victorious Leave advocates to unshackle from the EU.

There is another way suggested by some Leave campaigners, such as former Chancellor of the Exchequer Nigel Lawson: a so-called unilateral declaration of independence. Under it, the U.K. would repeal the 1972 European Communities Act, the instrument by which the U.K. joined what became the EU. That approach, says Patrick Birkinshaw, professor of public law at the University of Hull, would create “a legal nightmare.”

It would open up a legal vacuum for businesses and people, wiping away laws that govern a swath of economic activities, including financial-markets trading. And even such a risky and rapid exit would leave “a considerable legacy of EU law still in U.K. law,” said Neil Walker, professor of public law at Edinburgh University. Such a unilateral step would also further sour relations with the 27 remaining members of the EU, making future agreements difficult for some time.

Most legal minds believe Article 50 would be the only reliable way to give the U.K. a chance to negotiate a reasonable agreement with the rest of the EU on exit. But it wouldn’t guarantee one, and the legal and economic uncertainty around it would be prolonged.

For UK and EU, Breaking Up Is Legally Hard to Do – Wall Street Journal