1. Article 50 has now been triggered
On March 29th, UK Prime Minister Theresa May triggered Article 50 of the Treaty on European Union (TEU) by formally notifying the European Council of the United Kingdom’s intention to leave the European Union.
The timelines for negotiations for the UK’s exit from the EU and for establishing a new relationship between the European Union and the UK now start. Please read below for an overview of the next steps.
Phase 1: Separation
Article 50 envisages that the negotiations leading to the withdrawal of the United Kingdom from the European Union will last for two years, unless the European Council, in agreement with the UK, unanimously decides to extend this period.
In reality, the negotiation period is more likely to last less than eighteen months, given the formalities at European Council and European Commission level that first have to be gone through in order to formulate and agree the EU’s negotiating position. There is also pressure for the process to be concluded before the next European Parliament election, which is scheduled for May/June 2019.
The first step is for the remaining 27 EU Member States to formulate guidelines for the European Commission to use in negotiations with the UK. On the basis of these guidelines, the European Commission will submit recommendations for the conduct of the negotiations to the Council. The Council will then adopt a formal decision, authorising the opening of negotiations, and adopt negotiating directives specifying the substance of the negotiations and the detailed institutional arrangements required. Building in time for translation into all the EU’s official languages, these formal preparatory requirements are expected to take at least three months following the trigger of Article 50. Therefore, the EU and the UK will not formally enter into negotiations before July/August 2017.
In addition, an agreement between the two sides will have to be reached by December 2018 at the very latest, as it is likely that the exit agreement will have to be ratified by the national parliaments on both sides in accordance with their constitutional procedures.
At latest, in order to comply with the two-year period specified in Article 50 TEU and to have the withdrawal agreement in force by the next European elections, the whole negotiating process will have to be completed by April 2019.
Given the multitude and complexity of the issues on the table and the fact that most of the time pressure will be on the UK, with the EU Member States taking a rather relaxed view, our current assessment is that it is unlikely that this two-year period will be extended by a (required) unanimous decision of the 27 remaining Member States in the European Council.
One question that needs to be settled in parallel with the separation negotiations relates to the revocability or otherwise of the Article 50 exit notice.
Although the UK Government is adamant that the legal effect of Article 50 is irrevocable once triggered, international treaty law has a role to play. Article 68 of the Vienna Convention on the Law of Treaties 1969 states that a party that gives notice of its intention to withdraw from a treaty can revoke that notice at any time before it takes effect. But the legal position is not clear and there is a question mark over whether the Vienna Convention even applies: One view holds that the TEU creates an autonomous and special legal order which should not be interpreted by reference to other external international standards and that Article 50 amounts to a complete code for withdrawal. The TEU itself is silent on the position and the travaux préparatoires provide no conclusive guidance.
The question of whether the notice can be revoked or not could have considerable significance in terms of tactics around exit negotiations. In the view of the EU institutions and a majority of the remaining Member States, this is more of a political than a legal question. There is general consensus in Brussels that once the UK triggers Article 50, there is no turning back.
However, since the UK Government is adamant that the invocation of Article 50 TEU is irrevocable and hence constitutes in itself the de facto departure from the EU, this could also mean that the UK is – strictly interpreted – not bound by all the obligations of an EU Member State once Article 50 is triggered. This would include the contentious point of the UK’s ability to negotiate bilateral trade agreements with third countries.
At present, the question of the revocability of Article 50 is in the early stages of consideration before the Irish courts.
In parallel with the separation negotiations, discussions on the future arrangement of the EU-UK relationship could begin during this phase. However, it is unlikely and impossible (because of procedural requirements on the EU-side) that both the separation deal and the future relationship could be defined and finalised within the two year window. Legislative procedures – not even the politics – already stand in the way of such an approach.
Act 2: Transition
Once the separation is final, with or without an agreement, the two sides are likely to enter a period of transition. Both sides will need to assess where they stand after the two-year negotiation period. Since the TEU does not specify anything beyond the initial two-year negotiation period, in a legal sense the 27 remaining EU Member States and the UK will enter unchartered territory once the separation phase is over and while negotiations around the new relationship have yet to begin. There is no time limit on the transition period. But it is likely to take at least six months to allow the dust of the separation to settle and to fully identify the areas where a new EU-UK relationship looks most promising and those areas that will need more attention.
The UK Government also plans to introduce a Great Repeal Bill, which will remove the European Communities Act 1972 (which currently gives direct effect to all EU law in the UK) and will convert the body of existing EU law into UK law. In practice, it is likely that the UK Government will not convert all existing EU law into national law, but instead will pick and choose what should remain. In addition, EU legislation that remains will have to be amended to reflect the fact that the UK is no longer an EU Member State. For more detail on the Great Repeal Bill, click here.
In parallel, the EU will have to “de-Anglify” all of its existing regulations and treaties with third parties, i.e. remove all references to the UK as a Member State of the European Union. This in itself may have far-reaching consequences, especially as regards the EU’s relationship with third countries. The removal of the UK from a (free trade) treaty will substantially alter the third country’s perception of the nature of and the rationale for the original agreement. Some of the EU’s partners will probably demand renegotiation of existing agreements, on the basis that the UK’s departure constitutes a fundamental alteration the agreement and a shrinking of e.g. the market potential for certain goods and services.
Furthermore, in the absence of a separation agreement and in anticipation of a specific EU-UK free trade agreement, trade relations between the EU and the UK will be governed by general WTO-rules, including the WTO-specifications for tariffs.
Although PM Theresa May appears confident about the willingness of third countries to conclude bilateral trade agreements with the UK, it is important to underline that for the UK these negotiations are likely to be long and complex. In addition, if the UK is going to maintain a constructive environment for the conclusion of its most important trade agreement – i.e. with the EU – the UK is unlikely to be in a position to substantially deviate in these new agreements from trade standards previously agreed within the EU-context. Therefore, in the absence of a conclusive and comprehensive agreement with the EU, the UK cannot be expected to make significant concessions to third countries on standards governing trade, as this will negatively affect its negotiations with the EU.
In addition, the UK will have to deal with domestic political issues. Scottish First Minister Nicola Sturgeon has recently announced a plan to hold a new referendum on Scottish independence. This will distract from the Brexit agenda.
Act 3: Reengagement
The UK’s negotiations with the EU on its new relationship with the EU and a potential trade agreement will be conducted in accordance with the rules that govern the EU’s relationship with third countries, because by this stage the UK will be a third country like any other non- EU Member State.
Both parties will have to assess what agreement is in its best interests. While the UK Government has announced its desire to conclude a new strategic partnership with the EU, including a comprehensive Free Trade Agreement and a new customs agreement, the EU has still not expressed its views on this matter. “First things first” has been the motto for the EU – the focus is on the exit process and the possibility of an exit payment, rather than on the future relationship.
Whatever the format of such an agreement, it is likely to require an extensive negotiation process and may take years to be finalised. After an agreement has been reached, it will likely have to be submitted for ratification to the national procedures of the 27 EU Member States. Much like the Canada-Europe Trade Agreement (CETA) in 2016, the new EU-UK agreement will have to pass all layers of (sub)national parliamentary scrutiny in the EU, before finally entering into force.
If Scotland were to vote for independence in due course, the EU would find itself negotiating a new relationship with two additional sovereign entities in its immediate neighborhood. Another contentious issue will be the possible cost of Brexit for the UK, the so-called Brexit Bill. This will be the subject of another DLA Piper alert.
To conclude, the EU and the UK have entered uncharted territory where many legal issues remain unsolved on principle. The UK’s exit from the EU promises to be tough and the outcome of the negotiations remains far from uncertain.
“Autonomous vehicles are coming to America, to the world. This is the future.” So declared Secretary Ray LaHood, former U.S. Secretary of Transportation and a Senior Policy Advisor at DLA Piper at our long awaited Autonomous Vehicle event that took place on March 14th in collaboration with our friends at Herzog Fox & Neeman.
Our timing could not have been better. Just one day earlier, computer chip giant Intel announced its intent to acquire Israeli based Mobileye, a leader in autonomous driving technology, for $15.3 billion — the largest ever acquisition of an Israeli tech company — in a move that the companies hope will “accelerate the future of autonomous driving with improved performance in a cloud-to-car solution at a lower cost for manufacturers,” according to Intel CEO Brian Krzanich.
Barely a day goes that by that there isn’t a story in the news about autonomous vehicles, whether it is the Intel/Mobileye deal, Dubai’s recent announcement that it plans to launch its driverless flying taxis as early as July 2017, or California’s proposed regulations for the testing and deployment of fully self-driving vehicles. The wave of the future certainly looks more like it is the wave of tomorrow.
And this is what we focused on at our Autonomous Vehicle event last week. Secretary LaHood’s keynote focused on the future of transportation, including not only autonomous and connected vehicles, but the cyber risks that come along with increased vehicle technology, as well as drones and the increased demand for accessible and affordable transit by millenials.
On February 21, Jeremy Lustman presented the award for “British Company of the Year” to Barclays at the 2017 British Israeli Business Awards Dinner that was hosted by UK Israel Business in London. Other nominees were BC Partners and Rolls-Royce. Len Rosen, CEO of Barclays Israel, accepted the award on behalf of Barclays. UK Israel Business is a business connector that nurtures the dynamic growth of business and investment between the two countries. DLA Piper was a proud sponsor of this year’s British Company of the Year Award.
We are pleased to announce that DLA Piper will be holding an EU General Data Protection Regulation (GDPR) Data Protection Officer (DPO) Training Academy on March 29-31 in Brussels.
The course is aimed at IT, compliance and legal professionals or anyone who is taking on the role of Data Protection Officer.
The DPO Training Academy will provide practical, interactive guidance on how to establish and manage compliance as a DPO, consistent with the many requirements of the GDPR.
Upon completion, participants will be equipped with knowledge of the relevant legal, technical and operational skills needed to successfully fulfill the DPO role. Participants will also receive a comprehensive toolkit of supporting guidance notes and template documents to use in this role. A certificate of attendance will be issued on completion of the course.
For more information, please contact Naomi Maryles (email@example.com).
On February 16, Jeremy Lustman gave introductory remarks on a panel, “How Technology Has Changed the Way People Experience Sports”, at the OurCrowd 2017 Global Investor Summit that took place in Jerusalem. Over 3,000 people attended the event, including startups, venture capitalists and strategic investors, as well as over 200 multinational corporations. The theme of the summit was “The Future is Here” and it included over 60 booths demonstrating a variety of frontier technologies already changing the world, including industrial drones, companion care robots, miniature spectrometers to “google” everything, tracking devices with centimeter accuracy, phone based glucose monitors, and more. The sportstech panel was moderated by Jeremy Pressman, SportsTech Lead at OurCrowd, and panelists included Horste Brente, Founder of leAD Sports Accelerator, Jordan Fliegel, serial entrepreneur and startup investor, Russell Okung, all pro athlete on the Denver Broncos, and Joel Fisch, Director of EMEA Ecosystem Innovation Development, Intel.
Our Israel Country Group hosted its 5th annual Israel Real Estate Summit on February 14, 2017 at the Royal Beach Hotel in Tel Aviv. The event focused on trends, perspectives and real estate’s outlook in the US, Europe, and Asia Pacific, and featured keynote speakers Alex Foshay, Senior Managing Director of Newmark Grubb Knight Frank, who gave an overview of the US capital markets, and Keith Hall, Co-Founder of KBS Capital Advisors, who focused on trends and opportunities in the US commercial real estate market, as well as dynamics related to their successful bond raise in Israel last year.
Our esteemed group of panelists included Jonathan Landau (Fortis Property Group), Len O’Donnell (USAA Real Estate Company), Andreas Hardt (Blackstone Germany), Philip Levinson (Penmount Partners), Ely Razin (CrediFi), L.D. Salmanson (Cherre), Rachel Kisler (Kensee), Benjy Singer (WeWork), Charles Agus (Benedict Realty Group), Craig Solomon (Square Mile Capital), Mody Kidon (ALTO Real Estate Funds), Gabriele Bonfiglioli (COIMA RES), Jay Zwiebel (Harbor Group), and Alan Tantleff (FTI Consulting).
More than 180 people attended the standing-room only event, including many of Israel’s elite real estate investors with investments abroad, along with investors, real estate professionals and DLA Piper partners from Italy, Germany, France, the UK, the US, Australia, Georgia, and Hong Kong.
Stay tuned for details on our 2018 Israel Real Estate Summit!
In the wake of our second marquee WIN dinner in Tel Aviv a few weeks ago (to over 25 GCs), featuring a wonderful presentation by our Brussels-based colleague, Patrick Van Eecke, on data protection developments in Europe and around the world, please click https://www.dlapiper.com/en/us/insights/publications/2017/01/update-on-amendments-to-japans-privacy-law/
for our update on Japan’s privacy law, which were just announced at the end of December.
Please don’t hesitate to reach out if you have any questions or want to better understand the applicability of this legislation on your company’s activities.