In the fall-out following the UK referendum decision to leave the EU (a so-called "Brexit"), we take a brief look at what happened and where things may be headed, together with some comment from the market in Hong Kong.
On Thursday 23 June 2016, the UK electorate voted by a narrow majority to "leave" (as opposed to "remain" in) the EU. The referendum appears to have no legal binding effect on the UK government but serves as a strong political mandate.
The mechanics for withdrawal from the EU by a member state are set out in the Treaty of Lisbon's Art. 50. Article 50 provides that the EU Treaties shall cease to apply to the Member State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification of withdrawal to the European Council (unless the European Council, in agreement with the Member State concerned, unanimously decides to extend this period).
It appears that Art. 50 is the only credible legal mechanism for a member state to withdraw from the EU. It also appears that only the member state intending to withdraw can activate Art. 50.
What happens going forward is as likely to be a matter of high-stakes politics as it is about legal mechanics. Withdrawal was never intended to be easy and, if proceeded with, could take years.
To date, most commentators appear to be of the view that a second referendum is constitutionally possible but unlikely for political reasons. Alternatively, the UK government could seek another mandate by way of a general election (although, for now, it is not entirely clear what that mandate might be and there appears to be no particular appetite for a general election before the next one is due in 2020)*.
Should the UK withdraw from the EU of great significance will be whether she seeks continued access to the EU's single market and, if so, at what price.
Writing in the SCMP just after the referendum, chief reporter Enoch Yiu commented that:
"The net effect is that Hong Kong stands to gain in terms of its status as a gateway to China".
Hong Kong will be viewing developments with interest, bearing in mind her status as an English speaking jurisdiction and as the leading yuan trading centre outside the Mainland (the second being London), in addition to initiatives such as the AIIB and "One Belt".
Fred Kan (Partner at Fred Kan & Co) comments that:
"One would expect cities such as Hong Kong to seek to attract additional investment and transaction business post-Brexit".
As for the legal market in London and the UK, Robert Rhoda (Partner at Bird & Bird) notes that:
"In the short to mid-term, one may expect an increased demand for disputes work and regulatory advice, but a possible decrease in some transactional work flows. Beyond that, it is difficult to say for now".
Commenting on some less obvious barometers of the fall-out from Brexit, Jason Carmichael (Partner at Smyth & Co in association with RPC) observes that:
"It will be interesting to see how many lawyers in London consider new business opportunities in places such as Dublin and even the possibility of obtaining an Irish passport. Also keep an eye on the number of applicants applying to sit the 'overseas lawyer' exams in Hong Kong in 2017 and from which jurisdictions they apply".
* Editorial Note: Some commentators have raised the issue of whether an Act of Parliament is needed in order to "trigger" Art. 50. Article 50(1) provides that – "Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements" (emphasis added).