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Court of Justice Decides That UK Can Unilaterally Cancel Brexit, While Business Leaders Fear Supply-Chains Disruption Under Any Brexit Scenario

A number of Members of the Scottish, UK and European Parliament had lodged a petition for judicial review to a UK court (in Scotland) to determine whether the notification under Article 50 (to leave the EU) could be unilaterally revoked. On 3 October this year, that court referred the question to the EU Court of Justice. The UK Government fought to deny the admissibility of such a request, while the European Commission argued that the UK cannot unilaterally cancel its withdrawal, but rather that all 27 Member States must agree before it can be cancelled. Because of the urgency of the request, the Court of Justice applied the expedited procedure, which enables the Court to give a ruling quickly, by giving the case absolute priority.

In its judgment delivered on 10 December, the Full Court ruled that the UK is free to unilaterally revoke its notification of intention to leave the EU. There are, however, conditions attached, namely, that such possibility exists for as long as the withdrawal agreement that was concluded with the EU has not entered into force, or as long as the two-year period (or any extension to that period) ending with the withdrawal has not yet expired. In the UK’s case the two-year period ends on 29 March 2019, and there is currently no extension in place. In addition, importantly, the revocation must be decided following a democratic process in accordance with national constitutional requirements. Thus, the UK Parliament would have to vote on it in order for it to be authorised. The unequivocal and unconditional decision must then be communicated in writing to the European Council.

The Court of Justice’s final ruling will be welcomed by those who in the UK had voted “remain”, but it is unclear at this stage whether the Court’s ruling will influence a parliamentary vote – the very occurrence of which has now been called into question. On the same day as the ruling, Mrs. May decided to delay the Brexit withdrawal deal vote, as – were it to go ahead – it would almost certainly face defeat at the hands of an overwhelming number of MPs.

At the same time, European Commission spokeswoman Mina Andreeva announced that the EU would not renegotiate the withdrawal deal. Therefore, it is unclear how Mrs. May now intends to proceed.

The uncertainty being caused by the shambles and chaos that is British politics at the moment is proving especially hard for business. Also on 10 December, it was reported that companies that operate in a multi-EU landscape and that are therefore dependent on smoothly functioning cross-border supply chains, fear a no-deal Brexit most of all, but are also not particularly welcoming of a qualified Brexit (as presented in Mrs. May’s withdrawal agreement).

Representatives from some major industries, including the aerospace, automotive, food and pharma sectors, have pointed out that their competitiveness can be jeopardised due to the often complex, fast-moving international supply chains exporting from the UK into other European countries and vice-versa.

The parliamentary Business, Energy and Industrial Strategy (BEIS) Committee, chaired by British MP Rachel Reeves, has published its report on the reaction of these major sectors to the Brexit withdrawal agreement and accompanying Political Declaration on the future of Brexit beyond the transition period. The chairperson has commented that “businesses were clear that the deal on offer is inferior to what they currently enjoy as part of the single market and customs union, with supply chains built for maximum efficiency using frictionless trade across Europe. Businesses’ need for certainty – and a desire to avoid a hard Brexit – has led them to support the withdrawal agreement. However, they are under few illusions. They believe that the withdrawal agreement will leave them less competitive than the status quo of EU membership.” Businesses are calling the Political Declaration – which looks beyond the withdrawal agreement – as vague: “a list of aspirations rather than a blueprint for a future relationship”.

Hong Kong sellers with operations in and out of the UK will certainly sympathise with the business view presented above. However, with the currently fragmented scenario extant in the UK at the moment, and with the government facing what many are calling a major constitutional crisis, the uncertainty being complained of is likely to continue into the foreseeable future.

Content provided by Picture: HKTDC Research
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