Although a majority of Brits voted to leave the European Union, just about everything else about “Brexit” is unclear. How, when, and on what terms the UK divorces the EU is up in the air, and the uncertainty is making businesses nervous.
Three-quarters of CEOs are considering moving their business out of post-Brexit Britain. Last week, the pound dropped to a 168-year low. This week, the US Chamber of Commerce, the largest American business lobby group, warned that a so-called “hard Brexit,” in which the UK loses preferential trade access to EU markets, could mean forgoing American investments worth $600 billion.
Now, a convoluted court case is about to complicate things further. The verdict, which is likely to be announced in the next few weeks, could make it difficult for British prime minister Theresa May to deliver on her promise of officially starting the process of leaving the EU by March 2017. There’s also an outside chance it might stop Brexit from happening at all.
What some consider the “most important constitutional case in a generation” features a High Court challenge by the unusual alliance of an investment manager, some British expats, and a hairdresser against the government’s newly formed Department for Exiting the European Union.
The act of parliament which set out the rules for the EU membership referendum didn’t make the vote legally binding. That’s why, soon after polls closed on Jun. 23, lawyers began questioning its validity. With May adamant that “Brexit means Brexit,” the focus has shifted to who has the power to determine the next steps in Britain’s divorce proceedings.
The process for leaving the EU is set out in Article 50 of the Lisbon Treaty. As soon as a country notifies the European Council it wants out, the clock starts ticking on a maximum of two years of negotiations to divvy up shared assets, settle on final budget payments, and the like. (If both sides agree, the deadline can be extended.)
Prime minister May says she will trigger Article 50 by March next year. She says the government has the power to do this alone, without the consent of the parliament (where a majority of members are against leaving the EU). The group behind the court case is challenging May’s authority to decide when to invoke Article 50.
The balance of power
To an outsider, it might seem strange that the UK, which is famous for its strong legal system, can be so flummoxed in such an important situation. But that’s what happens when a country doesn’t have a constitution, which in countries like the US sets out a set of strict laws. Instead, in the UK, lawyers use a small set of statutes and rely on precedents set by previous court cases to decide on a legal challenge. For instance, in the Brexit court case, lawyers even invoked legal debates dating back to the rule of Henry VIII.
At the heart of the case are so-called royal prerogative powers, which were once held by British monarchs but now belong to May and her ministers. The government’s lawyers argue that these powers allow May to trigger Article 50 without a vote in parliament. They concede, however, that once May’s government has negotiated a divorce settlement with the EU, then the parliament will most likely get a say on whether the deal is acceptable or not.
Those against May—and Brexit in general—are not happy with this concession. They argue that, once May triggers Article 50, there is no turning back (“Brexit means Brexit”). If parliament doesn’t like the deal, does the UK still leave the EU? If it does, the British people lose some of their fundamental rights enshrined in UK law, the claimants argue.
“If you are going to take these rights away, you need parliamentary authority,” the claimants’ lawyer argued.
Over three days, lawyers from both sides made arguments in what David Allen Green, a legal scholar, believes is a finely balanced case. According to the Financial Times (paywall), other legal experts think the government may have underestimated the strength of the challenge, and overestimated the merits of its arguments.
The side that loses the case is almost certain to appeal to the Supreme Court, with a hearing likely in December. It’s also likely that the governments of Scotland, Wales, Northern Ireland, and Gibraltar—which all exercise various degrees of devolved power from the UK’s central government in London—may intervene individually. A majority of voters in Scotland, Northern Ireland, and Gibraltar voted to stay in the EU.
This could slow down or even halt the Brexit process. But there is also a chance that, even if May’s government loses the case in the Supreme Court, parliamentarians who were previously against leaving the EU may change their mind and agree to respect the outcome of the referendum when given a vote.
Those fighting the case, even though they don’t want the UK to leave the EU, would still consider this a victory, of sorts. The British legal system depends on stern tests like these to set precedents for future cases. That’s cold comfort, though, for businesses trying to make sense of Britain’s future trading relationships and economic prospects.