The UK Supreme Court rules on Article 50: where next for Brexit?

The much anticipated Supreme Court judgment in the legal challenge by Gina Miller and others against the UK Government was delivered yesterday.  Sarah Chilton looks at what this could mean for UK workers and employers with UK operations. The UK Supreme Court ruled yesterday that the UK Government cannot give notice of its decision to leave the European Union under Article 50 of the Lisbon Treaty without Parliamentary approval.  The judgment does not reverse or block the UK’s vote to leave the EU in the June 2016 referendum, but instead confirms the mechanism required for the UK to leave the EU.

The Supreme Court case was one of constitutional significance, and the decision upholds the doctrine of Parliamentary Sovereignty in the UK.  A key principle of UK law is that only Parliament can grant or take away rights.  This doctrine prevents the Government from taking decisions, without such a decision being passed by a vote of Parliament.

Paragraph 1 of Article 50 of the Lisbon Treaty, which is the “notice requirement”, states that “Any member state may decide to withdraw from the Union in accordance with its own constitutional requirements.”  So this was a case about the UK’s constitution, and the law governing the UK’s exit from the EU.

Yesterday’s Supreme Court decision means that an Act of Parliament must be passed authorising the Government to invoke Article 50, which would then trigger the formal exit process for the UK to leave the EU. As part of this process, the draft legislation will be debated in Parliament and parties from across the political spectrum will have an opportunity to put forward amendments to the legislation before it is put to a vote by Parliament, meaning opposition parties potentially have the power to influence the terms of the final Brexit deal.

Last week the UK Prime Minister, Theresa May, outlined her plans for the UK’s exit from the European Union. Mrs May has indicated previously that Article 50 would be triggered by March 2017 and made clear that the UK’s exit would be a ‘hard Brexit’ meaning the UK would not retain access to the Single Market or any partial membership of the EU.  Whether the March 2017 deadline is achievable is unclear, now the matter must go to a parliamentary debate and vote, but the Government has said it will introduce an Article 50 Bill within days of yesterday’s judgment.

Constitutional law aside, what might this decision mean for workers and employers?

Opposition MPs have already indicated their intention to propose amendments to draft legislation so as to ensure that any deal which is negotiated would allow the UK to retain access to the Single Market (which is based on the four freedoms of movement of goods, persons, services and capital with other countries in the European Economic Area (“EEA”) – which covers all EU member states plus Iceland, Liechtenstein and Norway).  Opposition MPs also want to prevent any deal which would result in the UK reverting to World Trade Organisation rules to regulate its trade with EU member states.

EU officials have said previously that there can be no access to the Single Market without accepting all of the four “freedoms”.  Whilst the Prime Minister made it clear last week that such a deal was  off the agenda for the UK, should Parliament refuse to pass proposed legislation which takes the UK out of the Single Market, the Prime Minister may have no choice in the matter.

Should the UK retain access to the Single Market it is likely to have to accept a degree of EU employment law regulation (as well as the four “freedoms”) but without being part of the decision-making process.

What might employment law look like post-Brexit, if the UK stays in the Single Market?

• The protections in place currently for workers and employees would likely remain, at least to some degree to comply with EU employment law.
• The UK would have to implement new EU employment legislation as it is passed.
• EU migrants would be free to come to live and work in the UK, and UK citizens would be free to live and work in the EU so the impact on immigration law would be less potentially, compared with a complete exit from both the EU and the Single Market.
• Whilst the UK courts would be unlikely to be bound by the decisions of the European Court of Justice (“ECJ”), one of the options which would enable the UK to retain access to the Single Market may involve the UK still having to follow the decisions of a separate European body which interprets EU legislation for those countries in the Single Market. Passporting rights allow UK financial institutions to provide services to other EEA countries without the need for additional licences and authorisations.  If the UK were to stay in the Single Market, but leave the EU, it would retain its passporting rights and the ability of financial institutions to provide services across the EEA would not be affected.

If the UK leaves both the EU and the Single Market, in our view the picture could look quite different.

• If the UK leaves the Single Market, it will lose its passporting rights unless a specific agreement can be reached to secure the UK’s continued access to EEA financial markets. This could have a significant impact on those working in the financial services sector, and on foreign institutions looking to set up branches, or provide financial services, in the UK.
• The UK would not have to implement future EU legislation which may enhance the protections of workers, and legislation in force already could be repealed post-Brexit, even if that would mean it was no longer compliant with EU law (although the Prime Minister has promised to protect workers’ rights going forward).
• The end of freedom of movement of people in the UK, meaning immigration from EU countries would likely be subject to the same or similar rules in place presently in relation to immigration from non-EU countries.
• The UK courts would be unlikely to be bound by any overriding European Court of Justice decisions and the UK Supreme Court would therefore serve as the last stop for litigants in the UK in most cases.  This would remove an additional layer of cost and uncertainty for those pursuing or defending employment claims.
• However, the Prime Minister has indicated that there would be no immediate legislative change, and it is believed that the Government has no intention to change UK employment law, as part of the Brexit process.

Yesterday’s development does create some uncertainty as to what the UK’s position will be post-Brexit, however, it will inevitably be better for workers and businesses that Parliament takes time to discuss and debate all of the relevant issues and the pros and cons of different outcomes, rather than rushing into a hasty decision with long-term economic, workplace and social implications.

What we do know is that it will be business as usual until two years after the Parliamentary vote or until an earlier deal with the EU is reached and that the UK Government, as outlined last week, is committed to achieving a deal which seeks to secure the UK’s trade and international relations with the EU, and further afield.  In the meantime the Foreign Secretary has indicated that trade deals with non-EU countries such as the US and India can be sketched out in pencil to ensure that whatever the outcome – hard or soft Brexit – the UK remains an attractive place for international companies to do business.