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LMA Webinar Impact of the UK referendum vote to leave the European Union Simon Gleeson, Partner – Clifford Chance LLP Matthew Dunn, Partner – Clifford Chance LLP
Croatia*
Norway Iceland
Lichtenstein
European Union (EU) (28) Bulgaria Poland
Czech Republic Romania Denmark Sweden
United Kingdom Hungary
Albania†
Andorra Armenia
Azerbaijan Bosnia Herzegovina
FYR Macedonia † Georgia Moldova Monaco
Montenegro † Russia
San Marino Serbia † Turkey † Ukraine
† EU candidate countries
European Economic Area
(EEA) (30)
European Free Trade Area (EFTA) (4)
Switzerland
Council of Europe (47)
* Croatia has provisionally been admitted to the EEA pending full ratification of its accession treaty
The UK in Europe
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Eurozone (19) Austria Germany Malta
Belgium Greece Netherlands
Cyprus Ireland Portugal
Estonia Italy Slovakia
Finland Latvia Slovenia
France Lithuania Spain
Luxembourg
British Crown Dependencies
Isle of Man Channel Islands (Jersey, Guernsey, Sark)
EU Outermost Regions (OMRs) E.g. Martinique; Canary Islands
Other E.g. Gibraltar
EU Overseas Countries & Territories (OCTs) E.g. British Virgin Islands; Aruba
What happens next?
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5 May 2016 Scottish elections, local elections in England, Mayoral election in London. EU referendum cannot be held on this date.
2015 2016
23 June Referendum
April 2017 French Presidential Elections
August 2017 German Federal Elections
July – December 2017 UK Presidency of Council of EU
The UK’s ‘new settlement’ Jobs and growth. Complete Internal Market, conclude further trade agreements Safeguards for non-euro members Controls on migration – “emergency break” Further powers for national parliaments – “red card”
17 December 2015 EU Referendum Act became law
10 November 2015 David Cameron set out the UK’s negotiating objectives
July 2016 – July 2018 Possible Article 50 negotiation
2018 onwards - Possible full treaty change - If the UK voted to remain in 2016/17 it would have a full veto and be
in a strong position to revisit any negotiating objectives it felt needed more work
2018 2017
Q3 2018 Possible Brexit
Certain Possible
What happens if Britain votes to leave? – Article 50(1) of the Treaty on European Union:
“Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements.”
– Article 50 provides for a two year period to negotiate a withdrawal agreement. This can be extended by mutual agreement if an agreement is not reached.
– The UK would remain a member of the EU during the negotiation, whether it was two years or extended, and EU law would continue to apply to the UK. Undertakings established in the UK as a member of the EU would continue to enjoy the same legal rights and be bound by the same obligations in relation to the conduct of their business within the EU.
– Two years is an ambitious target. Previous negotiations have taken anything between three (Greenland voted to leave in 1982, withdrawing in 1985) and over eight years (Switzerland negotiated its bilateral agreements with the EU between 1992 and 2004).
– Phased agreements? It is not certain whether the withdrawal agreement would be the final agreement between the UK and the continuing EU. The consensus amongst commentators is that it would be, and that it would take a long time to reach that agreement with the UK being “in” until it was “out.” It is possible that the UK could leave under a skeletal withdrawal agreement and negotiate a more comprehensive agreement over a longer period of time.
– Q3 2018: the earliest the UK could leave. 4
Alternatives to EU membership – Norway. EEA + EFTA membership. The UK would leave the EU and could emulate Norway in becoming a member
of the European Economic Area and the European Free Trade Association. ***Partial access to the EU Internal Market in services.***
– Switzerland. Bilateral agreements + EFTA. The UK would leave the EU and could emulate Switzerland in agreeing sector-by-sector treaties with the EU, and Free Trade Agreements with the EFTA countries. ***Partial access to the EU Internal Market in services.***
– Turkey. Customs Union. The UK would leave the EU and could emulate Turkey and enter into a Customs Union with the EU.
– UK/EU FTA. The UK would be outside the EU but could seek to negotiate a comprehensive Free Trade Agreement with the EU.
– WTO. The UK would leave the EU and rely on its membership of the World Trade Organisation as a basis for trade with the EU.
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Implications for LMA-based loan documentation – Governing law and enforcement – Documentary considerations – Implications for Lenders – Tax – Material Adverse Effect
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Documentary considerations – References to the EU or to EU legislation in
documents – Article 55 BRRD
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Next steps – Limited immediate documentation changes, but
ongoing review – LMA Brexit Working Party
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