Brexit: what next?


brexit-1Following the results of the referendum and the resignation of David Cameron, Theresa May has now been appointed Prime Minister and shall lead the Brexit. As laid out in our previous articles on the Brexit (Brexit: How to prepare oneself for the consequences?; The consequences of Brexit on trademarks and patents), implications on intellectual property law are to be expected, and in particular, on trademark and patent law. Such implications however, are not yet clear.

As tensions rise between concerning their future relationship between the United Kingdom and the European Union, here is a brief overview of the systems the U.K. could adopt once the divorce has been finalized.

First option: membership with the EFTA together with a free trade agreement

The United Kingdom has first and foremost the possibility to join the European Economic Area. The country would be joining Norway, Liechtenstein and Iceland. This would allow the U.K. to have complete access to the Single Market while accepting the principles of freedom of movement of persons, capital, goods and services. It would therefore be bound by the majority of European legislation and be subject to the jurisdiction of the ECJ – without taking part in actually making the European legislation. As a member of the EFTA, the UK could negotiate its own trade agreements. However these principles, particularly the principle of freedom of movement of people, are one of the main reasons behind the Brexit campaign! Therefore, it seems unlikely that the United Kingdom will opt for this model.

Second option: EFTA membership without a free trade agreement

The United Kingdom could be a member of the EFTA without being a member of the EEA, like Switzerland who negotiates agreements with the EU bilaterally. The United Kingdom could thereby freely decide which sectors to open to the Single Market. This would be particularly relevant to the banking sector.

This scenario, just like the previous one, sees the UK as a member of the EFTA having necessarily to accept the free movement of persons and more specifically, of workers. It would also involve participation in the European budget. A bilateral agreement could then be signed with the European Union in terms of access to the Single Market. Consequently, even though in theory the United Kingdom would not automatically be bound by European legislation, it would in practice need to comply with it so as to guarantee mutual access to the Single Market. Just like Switzerland, it would be able to have restricted access to the European banking market.

Third option: abide by the rules of the WTO

Some say this would be the “safety net” if no agreement of free trade is entered into by the United Kingdom and the European Union. Unlike in the scenarios where membership to the EFTA is sought, the United Kingdom here, would not need to accept the principle of free movement and would hence be free to establish its own policies, especially in matters of immigration and trade. Moreover, the United Kingdom would be free to negotiate bilateral agreements – however, these would not necessarily be as advantageous as the ones applied when the United Kingdom was a member of the European Union.

In spite of this, the application of the rules of the WTO entail a number of complications, especially relating to customs since this would imply re-establishing customs barriers, evaluating goods at customs and verifying the origins of products.

To be continued!